13,043,480 American Depositary Shares, or ADSs,
representing 26,086,960 of our equity shares are being sold by
the selling shareholders. Each ADS offered represents two equity
shares of Satyam Computer Services Limited. We will not receive
any of the proceeds from this offering.

Our outstanding ADSs are traded on the New York
Stock Exchange under the symbol SAY. The last
reported sale price of our ADSs on the New York Stock Exchange
on May 9, 2005 was US$23.00 per ADS. Our equity shares
are traded in India on The Stock Exchange, Mumbai and The
National Stock Exchange of India Limited. The closing price for
our equity shares on The Stock Exchange, Mumbai on May 9,
2005 was US$9.80 assuming an exchange rate of Rs. 43.45 per
dollar.

Neither the Securities and Exchange Commission
nor any state securities commission has approved or disapproved
of these securities or determined if this prospectus is truthful
or complete. Any representation to the contrary is a criminal
offense.

Per ADS

Total

Initial price to public

$

21.5000

$

280,434,820.00

Underwriting discounts and commissions

$

0.5375

$

7,010,870.50

Proceeds to selling shareholders, before expenses

$

20.9625

$

273,423,949.50

The selling shareholders have granted the
underwriters an option exercisable within seven days from the
date of this prospectus to purchase up to an aggregate of an
additional 1,956,520 ADSs, representing up to an additional
3,913,040 equity shares, from them at the initial price to
the public, less the underwriting discounts and commissions.

The underwriters are offering the ADSs subject to
various conditions. The underwriters expect to deliver the ADSs
in book-entry form only through the facilities of The Depository
Trust Company against payment in New York, New York on
May 16, 2005.

No dealer, salesperson or other person is
authorized to give any information or to represent anything not
contained in this prospectus. You must not rely on any
unauthorized information or representations. This prospectus is
an offer to sell or solicitation of an offer to buy only the
ADSs offered hereby, but only under circumstances and in
jurisdictions where it is lawful to do so. The information in
this prospectus is current only as of its date.

The offered ADSs may not be offered or sold,
directly or indirectly, in India or to any resident of India,
except as permitted by applicable Indian laws and
regulations.

In this prospectus, references to
U.S. or United States are to the United
States of America, its territories and its possessions.
References to India are to the Republic of India.
References to $, US$ or
dollars or U.S. dollars are to the
legal currency of the United States and references to
Rs. or rupees or Indian
rupees are to the legal currency of India. Our financial
statements are presented in Indian rupees and translated into
U.S. dollars and are prepared in accordance with United
States Generally Accepted Accounting Principles, or
U.S. GAAP. References to Indian GAAP are to
Indian Generally Accepted Accounting Principles. References to a
particular fiscal year are to our fiscal year ended
March 31 of such year.

Unless otherwise stated in this prospectus or
unless the context otherwise requires, references in this
prospectus to we, our, us,
Satyam and our company are to Satyam
Computer Services Limited and its consolidated subsidiaries and
other consolidated entities.

Except as otherwise stated in this document or
for numbers derived from the financial statements, all
translations from Indian rupees to U.S. dollars contained
in this document have been based on the noon buying rate of
Rs.43.62 per $1.00 in the City of New York on
March 31, 2005 for cable transfers in Indian rupees as
certified for customs purposes by the Federal Reserve Bank of
New York. No representation is made that the Indian rupee
amounts have been, could have been or could be converted into
U.S. dollars at such a rate or any other rate. Any
discrepancies in any table between totals and sums of the
amounts listed are due to rounding.

This prospectus includes statistical data about
the information technology, or IT, industry that comes from
information published by sources including International Data
Corporation, a provider of market and strategic information for
the IT industry and the National Association of Software and
Service Companies, or NASSCOM, an industry trade group. This
type of data represents only the estimates of International Data
Corporation and NASSCOM and other sources of industry data. In
addition, although we believe that data from these sources is
generally reliable, this type of data is inherently imprecise.
We caution you not to place undue reliance on this data.

You should read the following summary together
with the risk factors and the more detailed information about us
and our financial results included elsewhere in this prospectus
or incorporated by reference. See Incorporation of
Documents by Reference.

We are a global IT solutions provider, offering a
comprehensive range of IT services to our customers, including
application development and maintenance services, consulting and
enterprise business solutions, extended engineering solutions,
infrastructure management services and business process
outsourcing, or BPO. We began providing IT services to
businesses in 1988 and are currently the fourth largest Indian
IT software and services company, based on the amount of export
revenues generated during the fiscal year ended
March 31, 2004. Our revenues grew to $793.6 million in
fiscal 2005 from $414.5 million in fiscal 2002,
representing a compound annual growth rate of 24.2%. For the
same period, our net income grew from $42.4 million to
$153.8 million. The number of our employees, whom we refer
to as associates, grew from 9,532 as of March 31, 2002 to
20,690 as of March 31, 2005.

We provide services to customers from various
industries including manufacturing, banking and financial
services, insurance, healthcare, retail and transportation. We
also provide services to customers in telecommunications,
infrastructure, media and entertainment and semiconductors,
which we refer to as TIMES. We leverage our global delivery
model to deliver high quality, cost effective IT services to our
customers located around the world.

In May 2001, we completed an offering of
16,675,000 ADSs (representing 33,350,000 equity shares) in the
United States and elsewhere outside of India. On May 15,
2001, our ADSs were listed on the New York Stock Exchange, or
the NYSE.

In June 2002, we established our majority-owned
subsidiary, Nipuna Services Limited, or Nipuna, to provide BPO
services. Nipuna offers product support, technical help desk,
back-office transaction processing and customer care services in
the areas of finance and accounting, human resources, claims
administration and document management. Nipuna has recently
added services such as research, analytics and animation to its
portfolio of service offerings.

Over the past decade, there has been a
significant increase in the use of professional IT firms to
provide computing services worldwide. Global IT services
spending is estimated to total $400.0 billion in 2004 and
is projected to grow at a compound annual growth rate of 6.4% to
reach $512.8 billion by 2008, according to International
Data Corporation.

We believe the following aspects of our business
help our customers address the challenges posed by todays
evolving business and IT environments:



Comprehensive range of services combined
with specialized industry expertise.
Our comprehensive range of
end-to-end technology-based services encompasses application
development and maintenance services, consulting and enterprise
business solutions, extended engineering solutions,
infrastructure management services, and BPO services. This range
of services enables us to broaden our dialogue with potential
customers, deepen our relationships with existing customers and
diversify our revenue base. Our services are built on a
foundation of a rich understanding of the industries in which
our customers operate and the underlying technologies that drive
those industries. Our industry-focused business units such as
manufacturing, banking and financial services, insurance, TIMES,
healthcare, retail and transportation allow us to understand the
strategic issues facing our customers in each industry.



Flexible, highly evolved delivery model.
We provide our services through 20
development centers located in Australia, Canada, China,
Hungary, India, Japan, Malaysia, Singapore, United Arab
Emirates, United States and United Kingdom, as well as onsite
teams operating at our customers premises. Over the past
decade, we have made substantial investments in our
infrastructure, processes and systems allowing us to evolve our
global delivery model to effectively integrate offshore,
offsite, nearshore and onsite services and perform a greater
volume of work at our offshore

development centers. This delivery model seeks to
provide customers with seamless solutions in reduced timeframes,
enabling them to achieve operating efficiencies and realize
significant cost savings.



Established leadership position in
consulting and enterprise business solutions.
Our consulting and enterprise
business solutions help customers optimize their operating
costs, enhance the efficiency of their business processes and
improve their overall competitiveness. These solutions span the
development, implementation, integration and maintenance of
various enterprise-wide applications. Our solutions are enhanced
by our strategic alliances with more than 60 leading technology
providers. Our highly evolved delivery model, coupled with our
industry expertise and technology competencies, allows us to
provide customers with a value proposition in consulting and
enterprise solutions.



Strong relationships with blue chip
customers. We have long-standing
relationships with large multinational corporations built on our
successful execution of prior engagements. We believe that we
have significantly more Fortune Global 500 and Fortune
U.S. 500 corporations as customers, relative to our scale
of revenue, as compared to other leading Indian IT services
companies. Our track record of delivering comprehensive
solutions based on demonstrated industry and technology
expertise has helped in forging strong relationships with our
major customers and gaining increased business from them. We
have a history of high customer retention and derive a
significant proportion of our revenues from repeat business.



Track record of high quality execution.
We are committed to achieving
operational excellence in our processes and infrastructure. Our
quality assurance programs form an integral part of our project
management methodology and seek to ensure that we consistently
deliver high quality services to our customers. We constantly
benchmark our processes, people and infrastructure against
globally recognized standards.



Culture of innovation.
We have a history of innovation
that is facilitated by our entrepreneurial culture and our
managements willingness to make strategic investments in
growth markets. Our technology laboratories continue to develop
and bring to market new solutions based on new technologies. We
have also been innovative in our internal organization and have
introduced industry leading practices in hiring, resource
planning and knowledge sharing.

Our goal is to be a leading global provider of
comprehensive IT solutions and services. To achieve this, we
have developed a growth strategy based on the following:



leveraging our long-standing customer
relationships;



cross-selling our comprehensive range of services;



continuing to focus on enterprise-wide business
solutions by providing high quality value-added services;

We were incorporated under the laws of the
Republic of India in 1987. Our principal executive offices are
located at Bahadurpallay Village, Qutbullapur Mandal, R.R.
District, Hyderabad 500 855, India, and our telephone number at
that address is (91) 40-5523-3505. Our website address is
www.satyam.com and information contained on our website
does not constitute a part of this prospectus.

13,043,480 ADSs representing 26,086,960
equity shares, constituting approximately 8.2% of our issued and
outstanding equity shares before and after this offering,
excluding 1,322,110 shares held by Satyam Associate Trust.

Over-allotment option granted by the selling
shareholders

The selling shareholders have granted the
underwriters an option exercisable within seven days from the
date of this prospectus to purchase up to an aggregate of an
additional 1,956,520 ADSs, representing an additional
3,913,040 equity shares, from them at the initial price to
the public, less the underwriting discounts and commissions.

Selling shareholders

See Principal and Selling
Shareholders for more information on the selling
shareholders in this offering.

The ADSs

Each offered ADS represents two equity shares,
par value Rs.2 per share. The offered ADSs are evidenced by
American Depositary Receipts, or ADRs. See Description of
American Depositary Shares and Description of Equity
Shares.

ADSs to be outstanding after this offering

30,054,557 (assumes no exercise of the
underwriters over-allotment option to purchase additional
ADSs).

We are listing the offered ADSs on the New York
Stock Exchange, or NYSE. Our outstanding equity shares are
traded in India on The Stock Exchange, Mumbai and The National
Stock Exchange of India Limited.

NYSE symbol for ADSs

SAY.

The Indian Invitation to Participate

We have prepared and sent to all holders of our
equity shares an invitation to participate in this offering by
submitting their equity shares for sale in this offering
pursuant to Indian regulations. Our invitation to participate
has been mailed to holders of equity shares. Holders of ADSs are
not eligible to participate in the transactions contemplated by
the invitation to participate. We are not purchasing any equity
shares in this transaction. Equity shares will be purchased
solely by the underwriters from the selling shareholders for
sale in this offering. Under the terms of the invitation to
participate, the related

letter of transmittal, escrow agreement and other
documents, the shares to be sold by the selling shareholders
will be held in escrow by Citibank, N.A., Mumbai, as escrow
agent, until such time as they are required to be deposited with
Citibank N.A., Mumbai, as custodian on behalf of Citibank N.A.,
New York, the Depositary, against the issuance of ADSs
representing such shares and to be delivered to the underwriters
under the terms of the underwriting agreement entered into by
us, the underwriters and the selling shareholders. The
successful completion of these transactions by us, the selling
shareholders and the escrow agent is a condition precedent to
the underwriters obligation to purchase any ADSs in this
offering.

The following summary consolidated historical
financial data should be read in conjunction with, and are
qualified by reference to, our financial statements and the
related notes and Managements Discussion and
Analysis of Financial Condition and Results of Operations
included elsewhere in this prospectus and our other reports
filed with the SEC which have been incorporated herein by
reference. The statement of operations data for the five years
ended March 31, 2005 and the balance sheet data as of
March 31, 2005, 2004, 2003, 2002 and 2001 are derived from
our consolidated audited financial statements including the
notes, which have been prepared and presented in accordance with
U.S. GAAP. The statement of operations data for the three
years ended March 31, 2003 and the balance sheet data as of
March 31, 2003, 2002 and 2001 is as restated to give effect
to the restatement of shareholders equity and net income
to reflect the impact on deferred tax liabilities and income
taxes of our equity in the losses of Sify. As of
December 9, 2002, we ceased to hold a controlling interest
in Sify Limited, or Sify, and subsequently changed the method of
accounting for our interest in Sify from the consolidated
accounting method to the equity method. Consequently, financial
data as of March 31, 2005, 2004 and 2003 and for the years
ended March 31, 2005 and 2004 reflect our interest in Sify
accounted for under the equity method and are not comparable to
the financial data as of March 31, 2002 and 2001 and for
the years ended March 31, 2003, 2002 and 2001 which reflect
our interest in Sify accounted for on a consolidated basis.

Year Ended March 31,

2005

2004

2003

2002

2001

(dollars in thousands, except per share and per ADS data, or as stated

Includes common stock and additional paid-in
capital but excludes shares held by Satyam Associate Trust.

SFAS 142 pro forma disclosure

Effective April 1, 2002, Satyam adopted
Statement of Financial Accounting Standards No. 142
(SFAS 142), Goodwill and Other Intangible
Assets. Due to the adoption of SFAS 142, Satyam ceased
amortizing goodwill. The effect of this accounting change is
reflected prospectively. The following pro forma disclosure
presents the impact of SFAS 142 on net income/(loss), net
income/(loss) per share, and the related tax effect had the
standard been in effect for the years ended March 31, 2002
and 2001:

Year Ended March 31

2002

2001

(dollars in thousands except

per share amounts)

Reported net income/(loss)

$

42,357

$

(21,429

)

Add:

Goodwill amortization

16,997

24,728

Amortization of excess of cost of investment
over equity in net assets of associated companies

On April 21 2005, we announced that we
intend to acquire Citisoft plc, or Citisoft, a specialist
business and systems consulting firm that has focused on the
investment management industry since 1986. Citisoft is a
UK-based firm, with operating presences in London, Boston and
New York. We intend to initially acquire 75% of the shares
of Citisoft, and the remaining 25% in two equal tranches over
the next three years.

We expect that this strategic acquisition will
complement our existing IT service offerings within the banking,
financial services and insurance industries. Citisoft is
primarily involved in business and IT consulting at various
stages in the investment management process, such as program or
project management and business analysis or development.
Services provided by Citisoft include systems and operations
review and strategy, package evaluation and selection,
implementation management, outsourcing of one or more business
functions, feasibility studies and cost benefit analyses,
in-house bespoke analysis and design, and systems integration.

We have agreed to pay up to $38.7 million
for the acquisition, including a performance-based payment of up
to $15.5 million over three years, conditional upon
specified revenue and profit targets being met.

We expect to complete the acquisition in May
2005. However, completion of the acquisition is subject to
satisfaction of various conditions precedent, including
regulatory approvals, and as a result we cannot assure you that
the transaction will be completed.

Any investment in our ADSs involves a high
degree of risk. You should carefully consider the following
information about these risks, together with the other
information contained in this prospectus, before you decide to
buy our ADSs. If any of the following risks actually occur, our
company could be seriously harmed. In any such case, the market
price of our ADSs could decline, and you may lose all or part of
the money you paid to buy our ADSs.

Risks Related to Our Overall
Operations

Our revenues and profitability are
difficult to predict and can vary significantly from period to
period which could cause our share price to decline
significantly.

Our revenues and profitability have grown rapidly
in recent years and may fluctuate significantly in the future
from period to period. Therefore, we believe that
period-to-period comparisons of our results of operations are
not necessarily meaningful and should not be relied upon as an
indication of our future performance. The quarterly fluctuation
of revenues is primarily because we derive our revenues from
fees for services generated on a project-by-project basis. Our
projects vary in size, scope and duration. For example, we have
some projects that employ several people for only a few weeks
and we have other projects that employ over 100 people for six
months or more. A customer that accounts for a significant
portion of our revenue in a particular period may not account
for a similar portion of our revenue in future periods. In
addition, customers may cancel contracts or defer projects at
any time for a number of different reasons. Furthermore,
increasing wage pressures, employee attrition, pressure on
billing rates, the time and expense needed to train and
productively utilize new employees and changes in the proportion
of services rendered offshore can affect our profitability in
any period. There are also a number of factors, other than our
performance, that are not within our control that could cause
fluctuations in our operating results from period to period.
These include (i) the duration of tax holidays or tax
exemptions and the availability of other Government of India
incentives; (ii) currency fluctuations, particularly when
the rupee appreciates in value against the U.S. dollar,
since the majority of our revenues are in U.S. dollars and
a significant part of our costs are in rupees; and
(iii) other general economic and political factors. As a
result, our revenues and our operating results in a particular
period are difficult to predict, may decline in comparison to
corresponding prior periods regardless of the strength of our
business. If this were to occur, the share price of our equity
shares and our ADSs would likely decline significantly.

Any inability to manage our rapid growth
could disrupt our business and reduce our
profitability.

We have experienced significant growth in recent
periods. In fiscal 2005 our total revenues increased by 40.1% as
compared to fiscal 2004, and in fiscal 2004 our total revenues
increased by 23.3% as compared to fiscal 2003. As of
March 31, 2005, we had 20,690 employees (including
employees of Nipuna), whom we refer to as associates, worldwide
as compared to 14,456 associates as of March 31, 2004. In
addition, we are continuing our geographical expansion. We have
five offshore facilities in India and 15 overseas facilities
located in Australia, Canada, China, Hungary, Japan, Malaysia,
Singapore, United Arab Emirates, United Kingdom and United
States. In addition, we have 17 sales and marketing offices
located in Canada, Germany, Italy, the Netherlands, Spain,
Sweden, United Kingdom and United States and 14 sales and
marketing offices located in the rest of the world.

We expect our growth to place significant demands
on our management and other resources and to require us to
continue to develop and improve our operational, financial and
other internal controls, both in India and elsewhere. In
particular, continued growth increases the challenges involved
in:

The current economic environment, pricing
pressure and rising wages in India have negatively impacted our
revenues and operating results.

Spending on IT in most parts of the world has
recently increased after a two-year decreasing trend due to a
challenging global economic environment. We do experience
pricing pressures from our customers, which can negatively
impact our operating results. If economic growth slows, our
utilization and billing rates for our associates could be
adversely affected which may result in lower gross and operating
profits.

Wage costs in India, including in the IT services
industry, have historically been significantly lower than wage
costs in the United States and Europe for comparably skilled
professionals, which has been one of our competitive advantages.
However, large companies are establishing offshore operations in
India, resulting in wage pressures for Indian companies, which
may prevent us from sustaining this competitive advantage and
may negatively affect our profit margins. Wages in India are
increasing at a faster rate than in the United States, which
could result in increased cost of IT professionals, particularly
project managers and other mid-level professionals. In addition,
India has shown the highest average wage increases in the
Asia-Pacific region in 2004, particularly in the technology
sector. We may need to increase the levels of our employee
compensation more rapidly than in the past to remain competitive
with other employers, or seek to recruit in other low labor cost
jurisdictions to keep our wage costs low. Compensation increases
may result in a material adverse effect on our financial
performance.

Our business will suffer if we fail to
anticipate and develop new services and enhance existing
services in order to keep pace with rapid changes in technology
and the industries on which we focus.

The IT services market is characterized by rapid
technological change, evolving industry standards, changing
customer preferences and new product and service introductions.
Our future success will depend on our ability to anticipate
these advances and develop new product and service offerings to
meet customer needs and complement our offerings of end-to-end
IT services. For example, we have invested significant resources
in research and development efforts, such as in our enterprise
business solution laboratory and grid computing laboratory, in
order to continually develop capabilities to provide new
services to our customers. Should we fail to develop such
capabilities on a timely basis to keep pace with the rapidly
changing IT market or if the services or technologies that we
develop are not successful in the marketplace, our business and
profitability will suffer and it is unlikely that we would be
able to recover our research and development costs. Moreover,
products, services or technologies that are developed by our
competitors may render our services non-competitive or obsolete.

Our revenues are highly dependent on
customers primarily located in the United States and customers
concentrated in certain industries, and economic slowdowns or
factors that affect the economic health of the United States and
our customers industries may affect our
business.

In fiscal 2005, 2004 and 2003, approximately
68.3%, 73.3% and 73.2%, respectively, of our total revenues were
derived from the United States. For the same periods, we earned
29.2%, 32.0% and 33.0% of our IT revenues from the manufacturing
industry and 17.8%, 18.3% and 21.3%, of our IT revenues from the
banking and finance industry, respectively. If the current
economic recovery in the United States does not continue, our
customers may reduce or postpone their technology spending
significantly, which may in turn lower the demand for our
services and negatively affect our revenues and profitability.
Further, any significant decrease in the growth of the
manufacturing or banking and finance industries, or significant
consolidation in these industries, or other industry segments on
which we focus, may reduce the demand for our services and
negatively affect our revenues and profitability.

Recently, some countries and organizations have
expressed concerns about a perceived association between
offshore outsourcing and the loss of jobs. In the United States,
in particular, there has been increasing political and media
attention on these issues following the growth of offshore
outsourcing. Any changes in existing laws or the enactment of
new legislation restricting offshore outsourcing may adversely
impact our ability to do business in the United States, which is
the largest market for our services. In the last two years, some
U.S. states have proposed legislation restricting
government agencies from outsourcing their back office processes
and IT solutions work to companies outside the United States or
have enacted laws that limit or discourage such outsourcing.
Such laws restrict our ability to do business with
U.S. government-related entities. It is also possible that
U.S. private sector companies working with these
governmental entities may be restricted from outsourcing
projects related to government contracts or may face
disincentives if they outsource certain projects. Any of these
events could adversely affect our revenues and profitability.

We face intense competition in the IT
services and BPO markets which could prevent us from attracting
and retaining customers and could reduce our
revenues.

The markets for IT services and BPO are rapidly
evolving and highly competitive, and we expect that competition
will continue to intensify. We face competition in India and
elsewhere from a number of companies, including:



consulting firms such as Accenture, BearingPoint,
Capgemini and Deloitte Consulting;



divisions of large multinational technology firms
such as Hewlett-Packard and IBM;



IT outsourcing firms such as Computer Sciences
Corporation, Electronic Data Systems and IBM Global Services; and

We also compete with software firms such as
Oracle and SAP, service groups of computer equipment companies,
in-house IT departments of large corporations, programming
companies and temporary staffing firms. Nipuna, through which we
provide BPO services, faces competition from firms like Progeon
Limited and Wipro BPO, formerly known as Wipro Spectramind.

In addition, we have agreed not to compete with
Nipuna as part of the investor rights and securities
subscription agreements which we have entered into with
Nipunas two other investors. Pursuant to these agreements,
we and our affiliates are restricted from engaging in activities
that are or could directly or indirectly be competitive with the
business of Nipuna. Such activities include among others
providing BPO, soliciting existing or prospective customers of
Nipuna to obtain the services offered by Nipuna from other
service providers and investing in companies engaged in the same
or similar business as Nipuna. These non-compete restrictions
apply until the investors redeem all of their preference shares
in Nipuna or their equity interest in Nipuna falls below 5%
after an initial public offering. As a consequence, we currently
offer and plan to continue to offer BPO services only through
Nipuna. We cannot assure you that these non-compete restrictions
will not adversely affect our ability to attract and retain
customers in this competitive market or that they will not
adversely affect our revenues. See Business 
BPO Services and Nipuna.

A significant part of our competitive advantage
has historically been the cost advantage relative to service
providers in the United States and Europe. Since wage costs in
this industry in India are presently increasing at a faster rate
than those in the United States and Europe, our ability to
compete effectively will become increasingly dependent on our
reputation, the quality of our services and our expertise in
specific markets. Many of our competitors have significantly
greater financial, technical and marketing resources and
generate greater revenues than us, and we cannot assure you that
we will be able to compete successfully with such competitors
and will not lose existing customers to such competitors. We
believe that our ability to compete also depends in part on a
number of factors outside our control, including the ability of
our competitors to attract, train, motivate and retain highly
skilled technical associates, the price

at which our competitors offer comparable
services and the extent of our competitors responsiveness
to customer needs.

Our revenues are highly dependent upon a
small number of customers.

We derive a significant portion of our revenues
from a limited number of corporate customers. In fiscal 2005,
2004 and 2003, our largest customer together with its
affiliates, accounted for 10.8%, 14.3% and 16.1%, respectively,
of our total revenues. In fiscal 2005, 2004 and 2003, our second
largest customer accounted for 7.4%, 9.9% and 8.7%,
respectively, of our total revenues. In fiscal 2005, 2004 and
2003, our five largest customers accounted for 29.2%, 36.4% and
38.4%, respectively, of our total revenues. The volume of work
performed for specific customers is likely to vary from year to
year, particularly since we are usually not the exclusive
outside service provider for our customers.

There are a number of factors other than our
performance that could cause the loss of a customer and that may
not be predictable. In certain cases, we have significantly
reduced the services provided to a customer when the customer
either changed its outsourcing strategy by moving more work
in-house or replaced its existing software with packaged
software supported by the licensor. Some customers could also
potentially develop competing offshore IT centers in India and
as a result, work that may otherwise be outsourced to us may
instead be performed in-house. Reduced technology spending in
response to a challenging economic or competitive environment
may also result in lower revenues or loss of a customer. If we
lose one of our major customers or one of our major customers
significantly reduces its volume of business with us, our
revenues and profitability could be reduced.

Our fixed-price contracts expose us to
additional risks, many of which are beyond our control, which
may reduce the profitability of these contracts.

As a core element of our business strategy, we
offer a portion of our services on a fixed-price basis, along
with a time-and-materials basis. In fiscal 2005, 2004 and 2003,
we derived 34.2%, 31.7% and 27.5%, respectively, of our IT
services revenues from fixed-price contracts. Although we use
our software engineering processes and past project experience
to reduce the risks associated with estimating, planning and
performing fixed-price projects, we bear the risk of cost
overruns, completion delays and wage inflation in connection
with these projects. We may also have to pay damages to our
customers for completion delays. Many of these project risks may
be beyond our control. Our failure to accurately estimate the
resources and time required for a project, future wage inflation
and currency exchange rates, or our failure to complete our
contractual obligations within the time frame committed could
reduce the profitability of our fixed-price contracts.

Our customers may terminate projects before
completion or choose not to renew contracts, many of which are
terminable at will, which could adversely affect our
profitability.

Our contracts with customers do not commit our
customers to provide us with a specific volume of business and
can typically be terminated by our customers with or without
cause, with little or no advance notice and without penalty. Any
failure to meet a customers expectations could result in a
cancellation or non-renewal of a contract. Additionally, our
contracts with customers are typically limited to a specific
project and not any future work. A number of our multi-year
contracts are due for renewal in the coming fiscal year, and we
cannot assure you that our customers will choose to renew such
contracts for a similar or longer duration, on terms as
favorable as their current terms or at all. Other than our
performance, there are also a number of factors not within our
control that could cause the loss of a customer. Our customers
may demand price reductions, change their outsourcing strategy
by moving more work in-house or to one of our competitors, or
replace their existing software with packaged software supported
by licensors, any of which could reduce our revenue and
profitability.

A number of our customer contracts are
conditioned upon our performance, which, if unsatisfactory,
could result in less revenues than previously
anticipated.

We are considering the viability of introducing
performance-based or variable-pricing contracts. Should we
increase our use of value-based pricing terms, it will become
more difficult for us to predict the revenues we will receive
from our customer contracts, as such contracts would likely
contain a higher number of contingent terms for payment of our
fees by our customers. Our failure to meet contract goals or a
customers expectations in such performance-based contracts
may result in lower revenues, and a less profitable or an
unprofitable engagement.

Some of our multi-year customer contracts
contain certain provisions which, if triggered, could result in
lower future revenues and profitability under the
contract.

Some of our multi-year customer contracts contain
benchmarking provisions, most favored customer clause and/or
provisions restricting personnel from working on projects of our
customers competitors. Benchmarking provisions allow a
customer in certain circumstances to request a benchmark study
prepared by an agreed upon third-party comparing our pricing,
performance and efficiency gains for delivered contract services
with that of an agreed list of other service providers for
comparable services. Based on the results of the benchmarking
study and depending on the reasons for any unfavorable variance,
we may be required to make improvements in the services we
provide or to reduce the pricing for services to be performed
under the balance term of the contract, which may result in
lower future revenues and profitability under the contract.

Most favored customer clauses generally provide
that if, during the term of the contract, we were to offer
similar services to any other customers on terms and conditions
more favorable than those provided in such contract, we would be
obligated to offer equally favorable terms and conditions to the
customer. As pricing pressures increase, some customers may
demand price reductions or other pricing incentives. Any pricing
reduction agreed to in a subsequent contract may require us to
offer equally favorable terms to other customers with whom we
have a most favored contract under the remaining term of
contracts with those customers which may result in lower future
revenues and profitability.

A number of our customer contracts provide that,
during the term of the contract and for a certain period
thereafter ranging from six to twelve months, we may not provide
similar services to any of their competitors using the same
personnel. This restriction may hamper our ability to compete
for and provide services to customers in the same industry,
which may result in lower future revenues and profitability.

We may be unable to attract skilled
professionals in the competitive labor market.

Our ability to execute projects and to obtain new
customers depends largely on our ability to attract, train,
motivate and retain highly skilled technical associates,
particularly project managers, project leaders and other senior
technical personnel. We believe that there is significant
competition for technical associates who possess the skills
needed to perform the services that we offer. An inability to
hire and retain additional qualified personnel will impair our
ability to bid for or obtain new projects and to continue to
expand our business. Also, we cannot assure you that we will be
able to assimilate and manage new technical associates
effectively. In fiscal 2005, 2004 and 2003, we experienced
associate attrition in the IT services segment at a rate of
16.5%, 17.5% and 15.6%, respectively. Any increase in our
attrition rates, particularly the attrition rate of experienced
software engineers, project managers and project leaders, could
harm our growth strategy. We cannot assure you that we will be
successful in recruiting and retaining a sufficient number of
replacement technical associates with the requisite skills to
replace those technical associates who leave. Further, we cannot
assure you that we will be able to redeploy and retrain our
technical associates to keep pace with continuing changes in
evolving technologies and changing customer preferences. Should
we be unable to successfully recruit, retain, redeploy or
retrain our technical associates, we may become less attractive
to potential customers and may fail to satisfy the demands of
existing customers, which would result in a decrease in revenues
and profitability.

We dedicate significant resources to
develop international operations which may be more difficult to
manage and operate.

In addition to our offshore IT centers in India,
we have established IT centers in Australia, Canada, China,
Hungary, Japan, Malaysia, Singapore, United Arab Emirates,
United Kingdom and United States and plan to open additional
international facilities. Because of our limited experience in
managing and operating facilities outside of India, we are
subject to additional risks related to our international
expansion strategy, including risks related to complying with a
wide variety of national and local laws, restrictions on the
import and export of certain technologies and multiple and
possibly overlapping tax structures. In addition, we may face
competition in other countries from companies that may have more
experience with local conditions or with international
operations generally. We may also face difficulties integrating
new facilities in different countries into our existing
operations, as well as integrating employees that we hire in
different countries into our existing corporate culture.

We are investing substantial cash assets in
new facilities and physical infrastructure and our profitability
could be reduced if our business does not grow
proportionately.

As of March 31, 2005, we had contractual
commitments of approximately $8.8 million for capital
expenditures, and we estimate spending a further
$50.0 million until March 2006. We may encounter cost
overruns or project delays in connection with new facilities.
These expansions will significantly increase our fixed costs. If
we are unable to grow our business and revenues proportionately,
our profitability will be reduced.

Restrictions on immigration may affect our
ability to compete for and provide services to customers in the
United States and in other countries, which could hamper our
growth and cause our revenues to decline.

The vast majority of our employees are Indian
nationals. Most of our projects require a portion of the work to
be completed at the customers location which is typically
outside India. The ability of our associates to work in the
United States, Europe and in other countries outside India
depends on the ability to obtain the necessary visas and work
permits. As of March 31, 2005, the majority of our
associates located outside India were in the United States and
held either H-1B visas, allowing the employee to remain in the
United States during the term of the work permit and work as
long as he or she remains an employee of the sponsoring firm, or
L-1 visas, allowing the employee to stay in the United States
only temporarily. Although there is no limit to new L-1 visas,
there is a limit to the aggregate number of new H-1B visas that
the U.S. Citizenship and Immigration Services, or CIS, may
approve in any government fiscal year. In 2000, the United
States temporarily increased the annual limit for H-1B visas to
195,000; however, this increase expired in 2003 and the limit
was returned to 65,000 annually. Further, in response to the
terrorist attacks in the United States, the CIS has increased
its level of scrutiny in granting new visas. This may, in the
future, also lead to limits on the number of L-1 visas granted.
For example, the recent 2005 Appropriations Bill further
precludes foreign companies from obtaining L-1 visas for
employees with specialized knowledge: (1) if such employees
will be stationed primarily at the worksite of another company
in the U.S. and the employee will not be controlled and
supervised by his employer, or (2) if the placement is
essentially an arrangement to provide labor for hire rather than
in connection with the employees specialized knowledge.
Immigration laws in the United States may also require us to
meet certain levels of compensation and to comply with other
legal requirements including labor certifications as a condition
to obtaining or maintaining work visas for our associates
working in the United States. The CIS announced on
October 1, 2004 that it had received on the first day of
the new government fiscal year sufficient applications to fill
up all 65,000 visas that were available for the year. In
November 2004, the United States Congress passed a measure that
would increase the number of available H-1B visas for 2004 to
85,000. This legislation, when effective, is expected to
increase the H-1B visa quota by approximately 20,000 visas but
these visas would only be available to skilled workers who
possess a Masters or higher degree from educational
institutions in the United States. The increase is expected to
be fully utilized and may not be extended to future years.

Immigration laws in the United States and in
other countries are subject to legislative change, as well as to
variations in standards of application and enforcement due to
political forces and economic conditions. It is difficult to
predict the political and economic events that could affect
immigration laws, or the restrictive impact they could have on
obtaining or monitoring work visas for our employees. Our
reliance on work visas for a significant number of employees
makes us particularly vulnerable to such changes and variations
as it affects our ability to staff projects with associates who
are not citizens of the country where the work is to be
performed. As a result, we may not be able to obtain a
sufficient number of visas for our employees or may encounter
delays or additional costs in obtaining or maintaining the
condition of such visas.

We may engage in acquisitions, strategic
investments, strategic partnerships or alliances or other
ventures that may or may not be successful.

We may acquire or make strategic investments in
complementary businesses, technologies, services or products, or
enter into strategic partnerships or alliances with third
parties in order to enhance our business. For example, we have
recently announced a proposed strategic acquisition of Citisoft
plc (see Summary  Recent Developments).
It is possible that we may not be able to identify suitable
acquisition targets and candidates for strategic investments or
partnerships, or if we do identify such targets or candidates,
we may not be able to complete those transactions on terms
commercially acceptable to us, or at all. The inability to
identify suitable acquisition targets or investments or the
inability to complete such transactions may affect our
competitiveness and our growth prospects.

If we acquire a company, we may have difficulty
in assimilating that companys personnel, operations,
technology and software. In addition, the key personnel of the
acquired company may decide not to work for us. In some cases,
we may have difficulty in integrating the acquired products,
services or technologies into our operations. These difficulties
may disrupt our ongoing business, distract our management and
employees and increase our expenses.

Other than the proposed Citisoft plc acquisition
referred to above, as of the date of this prospectus, we have no
agreements or understanding to enter into any material
acquisition, investment, partnership, joint venture or alliance.

We may make strategic investments in early-stage
technology start-up companies in order to gain experience in or
exploit niche technologies. However, our investments may not be
successful. The lack of profitability of any of our investments
may have a material adverse effect on our operating results.

System failure could disrupt our
business.

To deliver our services to our customers, we must
maintain a high speed network of satellite, fiber optic and land
lines and an active voice and data communications 24 hours
a day between our main offices in Hyderabad, our other IT
centers in India and globally and the offices of our customers
worldwide. Any systems failure or a significant lapse in our
ability to transmit voice and data through satellite and
telephone communications could result in lost customers and
curtailed operations which would reduce our revenue and
profitability.

We may be liable to our customers for
damages caused by disclosure of confidential information or
system failure.

We are often required to collect and store
sensitive or confidential customer and consumer data. Many of
our customer agreements do not limit our potential liability for
breaches of confidentiality. If any person, including any of our
employees, penetrates our network security or misappropriates
sensitive data, we could be subject to significant liability
from our customers or from our customers clients for
breaching contractual confidentiality provisions or privacy
laws. Unauthorized disclosure of sensitive or confidential
customer and consumer data, whether through breach of our
computer systems, system failure or otherwise, could damage our
reputation and cause us to lose customers. Many of our contracts
involve projects that are critical to the operations of our
customers businesses and provide benefits which may be

difficult to quantify. Any failure in a
customers system or breaches of security could result in a
claim for substantial damages against us, regardless of our
alleged responsibility for such failure. Generally, we attempt
to limit our contractual liability for consequential damages in
rendering our services, however these limitations on liability
may be unenforceable in some cases, or may be insufficient to
protect us from liability for damages. In respect of some of our
contracts, we sub-contract a part of the work to certain
sub-contractors. We are liable to our customers for any breach
or non-performance by our sub-contractors under the
sub-contracts. We maintain general liability insurance coverage,
including coverage for errors and omissions, however this
coverage may not continue to be available on reasonable terms
and may be unavailable in sufficient amounts to cover one or
more large claims. Further, an insurer might disclaim coverage
as to any future claim. A successful assertion of one or more
large claims against us that exceeds our available insurance
coverage or results in changes in our insurance policies,
including premium increases or the imposition of a large
deductible or co-insurance requirement, could adversely affect
our operating results and profitability.

Our success depends in large part upon our
management team and key personnel and our ability to attract and
retain them.

We are highly dependent on the senior members of
our management team. Our future performance will be affected by
any disruptions in the continued service of these persons. We do
not maintain key man life insurance for any of the senior
members of our management team or other key personnel, except
for our chief executive officer. Competition for senior
management in our industry is intense, and we may not be able to
retain such senior management personnel or attract and retain
new senior management personnel in the future. The loss of any
member of our senior management team or other key personnel may
have a material adverse effect on our business, results of
operations and financial condition.

Our insiders are significant shareholders,
are able to control the election of our board and may have
interests which conflict with those of our shareholders or
holders of our ADSs.

Our executive officers and directors, together
with members of their immediate families, beneficially owned, in
the aggregate approximately 9.4% of our outstanding equity
shares as of March 31, 2005. As a result, acting together,
this group has the ability to exercise significant control over
most matters requiring our shareholders approval,
including the election and removal of directors and significant
corporate transactions. These insider shareholders may exercise
control even if they are opposed by our other shareholders.
Without the consent of these insider shareholders, we could be
delayed or prevented from entering into transactions (including
the acquisition of our company by third parties) that may be
viewed as beneficial to the Company and all of the shareholders.

Our financial results are impacted by the
financial results of entities that we do not
control.

As of March 31, 2005, we have a significant,
non-controlling interests in Sify, Satyam Venture Engineering
Services Private Limited, or Satyam Venture, and CA Satyam ASP
Private Limited, or CA Satyam, that are accounted for under
U.S. GAAP using the equity method of accounting. Under this
method, we are obligated to report as Equity in earnings
(losses) of associated companies, net of taxes a pro-rata
portion of the financial results of any such company in our
statement of operations even though we do not control such
company but have the ability to exercise certain influence over
their operating and financial policies. Thus, our reported
results of operations can be significantly higher or lower
depending on the results of Sify, Satyam Venture and CA Satyam
or other companies in which we may make similar investments even
though we may have only a limited ability to influence their
activities. We may also be required to record additional
impairment charges in their carrying value if we deem the
investment to be impaired due to adverse events, many of which
are outside of our control, on their business, results of
operations and financial condition in future periods. Currently,
we make estimates in the preparation of financial statements
including the utility of goodwill. Changes in such estimates
resulting from events, many of which are outside of our control,
may result in the impairment of goodwill which would negatively
impact our net income under U.S. GAAP. Such impact on net
income may result in a reduction of the

market value of our shares. Our financial
statements do not reflect any amortization of goodwill in fiscal
2005, 2004 and 2003, respectively.

The value of our interest in Sify and our
subsidiaries may decline.

As of March 31, 2005, we held 11,182,600
equity shares of Sify, representing 31.6% of its outstanding
shares. Sifys ADSs are listed for trading on the Nasdaq
National Market under the symbol SIFY; however, we
do not know whether Sify will be able to retain this listing in
the future. The market price of Sifys ADSs has been highly
volatile, ranging from a high of $452 per ADS to a low of
$0.88 per ADS from its initial public offering in October
1999 through March 31, 2005, and may continue to fluctuate
widely. Any decline in the market price of Sifys ADSs is
likely to cause the value of the equity shares of Sify which we
hold to decline. We hold our interest in Sify in the form of
equity shares for which there is no market and our ability to
convert these equity shares into ADSs is restricted. Under a
shareholders agreement to which we are a party, mergers,
acquisitions and sales of substantially all the assets of Sify
require the approval of two other Sify shareholders, Softbank
Asia Infrastructure Fund, or SAIF, and VentureTech Solutions
Private Ltd., or VentureTech. Sify has not been profitable since
its incorporation and may continue to incur significant losses
and negative cash flows in the future. In addition, our Nipuna
subsidiary has experienced losses during each year since its
inception and it is likely that it will continue to experience
such losses in the future.

Stock-based compensation expenses may
significantly reduce our net income under
U.S. GAAP.

Although Satyam has suspended, except in certain
cases, all new grants of stock options as of October 1,
2004, our reported income under U.S. GAAP has been and will
continue to be affected by the grant of warrants or options
under our various employee benefit plans. Under the terms of our
existing plans, some of which have outstanding obligations to
grant options in future, employees are typically granted
warrants or options to purchase equity shares at a substantial
discount to the current market value. These grants require us to
record non-cash compensation expenses under currently applicable
U.S. GAAP, amortized over the vesting period of the
warrants or options. Depending on the market value or fair value
of our equity shares on the dates the outstanding grants were
made and future grants are made, amortization of deferred
stock-based compensation may contribute to reducing our
operating income and net income under U.S. GAAP. Our
subsidiaries and associated companies also have stock option
schemes which have and will continue to generate stock-based
compensation expenses and have and will reduce our operating
income and net income.

Our earnings will be adversely affected
once we change our accounting policies with respect to the
expensing of stock options.

Currently we account for share-based compensation
transactions using the intrinsic value method as prescribed by
Accounting Principles Board, or APB, Opinion No. 25,
Accounting for Stock Issued to Employees, and have
adopted the pro forma disclosure provisions of the Statement of
Financial Accounting Standard, or SFAS No. 123,
Accounting for Stock-Based Compensation. On
December 16, 2004, the FASB issued FAS 123R,
Share-Based Payment, an amendment of FASB Statements
No. 123 and 95, which requires that such transactions
be accounted for using a fair-value-based method and recognized
as expenses in our consolidated statement of operations. As of
the required effective date, the standard requires that the
modified prospective method be used, which requires that the
fair value of new awards granted from the beginning of the year
of adoption (plus unvested awards at the date of adoption) be
expensed over the vesting period. In addition, the statement
encourages the use of the binomial approach to value
stock options, which differs from the Black-Scholes option
pricing model that we currently use in the footnotes to our
consolidated financial statements. Many companies have or are in
the process of changing their accounting policies to expense the
fair value of stock options. This change in the accounting
policy with respect to the treatment of employee stock option
grants will adversely affect our earnings and will have a
significant impact on our consolidated statement of operations
as we will be required to expense the fair value of our stock
option grants rather than expensing the intrinsic value of

stock options as is our current practice.
FAS 123R will be applicable to Satyam for annual periods
beginning after June 15, 2005 and currently we have not
determined which transition method we will use and have not
estimated the likely impact that FAS 123R will have on our
results of operations.

Compliance with new and changing corporate
governance and public disclosure requirements adds uncertainty
to our compliance policies and increases our costs of
compliance.

Changing laws, regulations and standards relating
to accounting, corporate governance and public disclosure,
including the Sarbanes-Oxley Act of 2002, new
U.S. Securities and Exchange Commission, or SEC,
regulations, the NYSE, rules, Securities and Exchange Board of
India, or SEBI, rules, and Indian stock market listing
regulations are creating uncertainty for companies like ours.
These new or changed laws, regulations and standards may lack
specificity and are subject to varying interpretations. Their
application in practice may evolve over time, as new guidance is
provided by regulatory and governing bodies. This could result
in continuing uncertainty regarding compliance matters and
higher costs of compliance as a result of ongoing revisions to
such corporate governance standards.

In particular, our efforts to comply with
Section 404 of the Sarbanes-Oxley Act of 2002 and the
related regulations regarding our required assessment of our
internal controls over financial reporting and our external
auditors audit of that assessment requires the commitment
of significant financial and managerial resources. We
consistently assess the adequacy of our internal controls over
financial reporting, remediate any control deficiencies that may
be identified, and validate through testing that our controls
are functioning as documented. While we do not anticipate any
material weaknesses or significant deficiencies, our independent
auditors may be unable to issue unqualified attestation reports
on managements assessment on the operating effectiveness
of our internal controls over financial reporting.

Additionally, under revised corporate governance
standards adopted by The Stock Exchange, Mumbai, or the BSE, and
The National Stock Exchange of India Limited, or the NSE, which
we collectively refer to as the Indian Stock Exchanges, we must
comply with additional standards by December 31, 2005.
These standards include a certification by our chief executive
officer and chief financial officer that they have evaluated the
effectiveness of our internal control systems and that they have
disclosed to our auditors and our audit committee any
deficiencies in the design or operation of our internal controls
of which they may become aware, as well as any steps taken or
proposed to resolve the deficiencies.

We are committed to maintaining high standards of
corporate governance and public disclosure, and our efforts to
comply with evolving laws, regulations and standards in this
regard have resulted in, and are likely to continue to result
in, increased general and administrative expenses and a
diversion of management time and attention from
revenue-generating activities to compliance activities. In
addition, the new laws, regulations and standards regarding
corporate governance may make it more difficult for us to obtain
director and officer liability insurance. Further, our board
members, chief executive officer and chief financial officer
could face an increased risk of personal liability in connection
with their performance of duties. As a result, we may face
difficulties attracting and retaining qualified board members
and executive officers, which could harm our business. If we
fail to comply with new or changed laws, regulations or
standards of corporate governance, our business and reputation
may be harmed.

As a foreign private issuer, we are subject
to different U.S. securities laws and rules than a domestic
issuer, which may, among other things, limit the information
available to holders of our securities.

As a foreign private issuer, we are subject to
requirements under the Securities Act of 1933, as amended, or
Securities Act, and the Securities Exchange Act of 1934, as
amended, or Exchange Act, which are different from the
requirements applicable to domestic U.S. issuers. For
example, our officers, directors and principal shareholders are
exempt from the reporting and short-swing profit
recovery provisions of Section 16 of the Exchange Act and
the rules thereunder with respect to their purchases and sales
of our ordinary shares and/or ADSs. The periodic disclosure
required of foreign private issuers is more limited than the
periodic disclosure required of domestic U.S. issuers and
therefore there may be less

publicly available information about us than is
regularly published by or about U.S. public companies in
the United States.

Terrorist attacks or a war could adversely
affect our business, results of operations and financial
condition.

Terrorist attacks, such as the attacks of
September 11, 2001 in the United States, and other acts of
violence or war, such as the continuing conflict in Iraq, have
the potential to have a direct impact on our customers. To the
extent that such attacks affect or involve the United States,
our business may be significantly impacted, as the majority of
our revenues are derived from customers located in the United
States. In addition, such attacks may make travel more
difficult, may make it more difficult to obtain work visas for
many of our associates who are required to work in the United
States, and may effectively curtail our ability to deliver our
services to our customers. Such obstacles to operate our
business may increase our expenses and negatively affect the
results of our operations. Many of our customers visit several
IT services firms, including their offshore facilities, prior to
reaching a decision on vendor selection. Terrorist threats,
attacks or war could make travel to our facilities more
difficult for our customers and may delay, postpone or cancel
decisions to use our services.

Risks Related to Investments in Indian
Companies

We are incorporated in India, and a substantial
portion of our assets and our employees are located in India.
Consequently, our financial performance and the market price of
our ADSs will be affected by changes in exchange rates and
controls, interest rates, Government of India policies,
including taxation policies, as well as political, social and
economic developments affecting India.

The Government of India has recently taken
actions to curtail or eliminate tax benefits that we have
historically benefited from.

The statutory corporate income tax rate in India
is currently 35.0%. This tax rate is presently subject to a 2.5%
surcharge. The amount of tax and surcharge payable is further
subject to a 2.0% education cess, resulting in an effective tax
rate of 36.6%. We benefit from tax incentives provided to
software entities such as an exemption from payment of Indian
corporate income taxes until the earlier of fiscal 2009 or 10
consecutive years of operations for software development
facilities designated as Software Technology Parks,
or STP units. The benefits of this tax incentive have
historically resulted in our effective tax rate being well below
statutory rates. The exemption for our STP units was reduced
from 100% to 90% for the fiscal 2003, and is expected to expire
between fiscal 2006 and fiscal 2010. We also earn certain other
foreign income and domestic income, which is taxable
irrespective of the above tax exemption.

All facilities registered in the exemption
program before March 31, 2001, which include all of our
existing facilities in India and registrations for two new
facilities which have not yet been constructed, will continue to
benefit from this program under present law. Over time, as we
construct additional facilities, however, the overall benefits
of this tax program to our company will decrease with a
consequential increase in our effective tax rate. When our tax
holidays expire or terminate, our tax expense will materially
increase, reducing our profitability. We cannot assure you as to
what action the present or future governments of India will take
regarding tax incentives for the IT industry.

In addition, the Finance Minister of India has
recently proposed a fringe benefit tax that would be levied on
employers. Under this fringe benefit tax, employers would be
required to pay a tax of 30% (plus applicable cess and
surcharge) on the value of the fringe benefits or privileges
that are provided or deemed to be provided to employees on a
collective, rather than individual, basis. In the event that the
Government of India adopts this tax scheme, or any similar
proposal, our tax expense may increase, and this could adversely
affect our profitability.

Foreign investment restrictions under
Indian law may adversely impact the value of our ADSs,
including, for example, restrictions that limit your ability to
reconvert equity shares into ADSs, which may cause our equity
shares to trade at a discount or premium to the market price of
our ADSs.

Our equity shares are listed and traded on the
Indian Stock Exchanges, and they may trade on these stock
exchanges at a discount or premium to the ADSs traded on the
NYSE, in part because of restrictions on foreign ownership of
the underlying shares.

Our ADSs are freely convertible into our equity
shares under the deposit agreement governing their issuance, or
the Deposit Agreement. The Reserve Bank of India, or RBI,
prescribes fungibility regulations permitting, subject to
compliance with certain terms and conditions, the reconversion
of equity shares to ADSs provided that such equity shares are
purchased from an Indian Stock Exchange through stock brokers
and the actual number of ADSs outstanding after such
reconversion is not greater than the original number of ADSs
outstanding. If you elect to surrender your ADSs and receive
equity shares, you will only be able to trade those equity
shares on an Indian Stock Exchange and, under present law, it is
unlikely you will be permitted to reconvert those equity shares
to ADSs. Additionally, investors who exchange ADSs for the
underlying equity shares and are not holders of record will be
required to declare to us details of the holder of record, and
the holder of record will be required to disclose the details of
the beneficial owner. Any investor who fails to comply with this
requirement may be liable for a fine of up to Rs.1,000 for each
day such failure continues. Such restrictions on fungibility of
the underlying equity shares to ADSs may cause our equity shares
to trade at a discount or premium to the ADSs.

The sale of equity shares underlying the ADSs by
a person not resident in India to a resident of India does not
require the prior approval of the RBI, provided such sales are
effected through the Indian Stock Exchanges. Any sale of such
underlying equity shares by a person not resident in India to a
resident of India outside of the Indian Stock Exchanges can,
however, be completed without prior RBI approval, provided such
equity shares are transferred based on a pricing formula
established by the Indian foreign exchange laws which set a
maximum price requirement for sale of such equity shares.

Regional conflicts or natural disasters in
South Asia and elsewhere could adversely affect the Indian
economy, disrupt our operations and cause our business to
suffer.

South Asia has from time to time experienced
instances of civil unrest and hostilities among neighboring
countries, including between India and Pakistan. In recent years
there have been military confrontations between India and
Pakistan that have occurred in the region of Kashmir and along
the India-Pakistan border. Military activity or terrorist
attacks in the future could influence the Indian economy by
disrupting communications and making travel more difficult and
such political tensions could create a perception that
investments in Indian companies involve higher degrees of risk.
This, in turn, could have a material adverse effect on the
market for securities of Indian companies, including our equity
shares and our ADSs, and on the market for our services. In
addition, as an international company, our offshore and onsite
operations may be impacted by natural disasters such as
earthquakes, tsunamis, disease and health epidemics. In December
2004, certain parts of India were severely affected by a tsunami
triggered by an earthquake in the Indian Ocean. Though our
operations were not affected by the disaster, we cannot
guarantee that in the future our operations will not be affected
by the effect such natural disasters may have on the economies
of India and other countries in the region.

Political instability could seriously harm
business and economic conditions in India generally and our
business in particular.

During the past decade, the Government of India
has pursued policies of economic liberalization, including
significantly relaxing restrictions on the private sector.
Nevertheless, the role of the Indian central and state
governments in the Indian economy as producers, consumers and
regulators has remained significant. The general elections in
2004 for the lower house of the Indian Parliament resulted in no
party winning an absolute majority and a coalition government
has been formed. We cannot assure you that these liberalization
policies will continue in the future. Government corruption
scandals and protests

against privatization could slow down the pace of
liberalization and deregulation. The rate of economic
liberalization could change, and specific laws and policies
affecting technology companies, foreign investment, currency
exchange rates and other matters affecting investment in our
securities could change as well. A significant change in
Indias economic liberalization and deregulation policies
could disrupt business and economic conditions in India
generally and our business in particular.

Our functional currency is the Indian rupee,
although we transact a major portion of our business in
U.S. dollars and several other currencies and accordingly
face foreign currency exposure through our sales in the United
States and elsewhere and purchases from overseas suppliers in
U.S. dollars and other currencies. Historically, we have
held a substantial majority of our cash funds in rupees.
Accordingly, changes in exchange rates may have a material
adverse effect on our revenues, other income, cost of services
sold, gross margin and net income, which may in turn have a
negative impact on our business, operating results and financial
condition.

The exchange rate between the rupee and the
U.S. dollar has changed substantially in recent years and
may fluctuate substantially in the future. In fiscal 2005, 2004
and 2003, our U.S. dollar-denominated revenues represented
81.8%, 84.5% and 81.2%, respectively, of our total revenues. We
expect that a majority of our revenues will continue to be
generated in U.S. dollars for the foreseeable future and
that a significant portion of our expenses, including personnel
costs as well as capital and operating expenditures, will
continue to be denominated in rupees. Consequently, our results
of operations will be adversely affected to the extent that the
rupee appreciates against the U.S. dollar. Depreciation of
the rupee will result in foreign currency translation losses in
respect of foreign currency borrowings, if any.

We have sought to reduce the effect of exchange
rate fluctuations on our operating results by purchasing foreign
exchange forward and option contracts to cover a portion of
outstanding accounts receivable. As of March 31, 2005 and
2004, we had outstanding forward and option contracts in the
amount of $301.5 million and $44.5 million,
respectively. This increase is primarily attributable to our
decision to actively hedge our foreign currency exposure given
the recent volatility of the Indian rupee against the
U.S. dollar. We may not be able to purchase contracts
adequate to insulate ourselves from foreign exchange currency
risks. Additionally, the policies of the RBI may change from
time to time which may limit our ability to hedge our foreign
currency exposures adequately.

Fluctuations in the exchange rate between the
rupee and the U.S. dollar will also affect the
U.S. dollar conversion by our Depositary of any cash
dividends paid in rupees on the equity shares represented by the
ADSs. In addition, fluctuations in the exchange rate between the
Indian rupee and the U.S. dollar will affect the
U.S. dollar equivalent of the Indian rupee price of our
equity shares on the Indian Stock Exchanges. As a result, these
fluctuations are likely to affect the prices of our ADSs. These
fluctuations will also affect the dollar value of the proceeds a
holder would receive upon the sale in India of any equity shares
withdrawn from our Depositary under the deposit agreement. We
cannot assure you that holders of ADSs will be able to convert
rupee proceeds into U.S. dollars or any other currency or
with respect to the rate at which any such conversion could
occur. In addition, our market valuation could be seriously
harmed by the devaluation of the rupee if U.S. investors
analyze our value based on the U.S. dollar equivalent of
our financial condition and results of operations.

Our ability to acquire companies organized
outside India as part of our growth strategy depends on the
approval of the Government of India and/or the RBI and failure
to obtain this approval could negatively impact our
business.

We have developed a growth strategy based on,
among other things, expanding our presence in existing and new
markets and selectively pursuing joint venture and acquisition
opportunities. Foreign exchange laws in India presently permit
Indian companies to acquire or invest in foreign companies
without any prior governmental approval if the transaction
amount does not exceed 100% of the net worth of the foreign
company as of the date of its most recent audited balance sheet.
If consideration for the

transaction is paid out of the proceeds of an
American Depositary Receipt, or ADR, or Global Depositary
Receipt, or GDR, sale, Indian exchange control laws do not
impose any investment limits. Acquisitions in excess of the 100%
net worth threshold require prior RBI approval. It is possible
that any required approval from the RBI may not be obtained. Our
failure to obtain approvals for acquisitions of companies
organized outside India may restrict our international growth,
which could negatively affect our business and prospects.

If we are unable to protect our
intellectual property rights, or if we infringe on the
intellectual property rights of others, our business may be
harmed.

The laws of India do not protect intellectual
property rights to the same extent as the laws in the United
States. Further, the global nature of our business makes it
difficult for us to control the ultimate destination of our
products and services. The misappropriation or duplication of
our intellectual property could curtail our operations or reduce
our profitability.

We rely upon a combination of non-disclosure and
other contractual arrangements and copyright, trade secret and
trademark laws to protect our intellectual property rights.
Ownership of software and associated deliverables created for
customers is generally retained by or assigned to our customers,
and we do not retain an interest in such software and
deliverables.

We have applied for the registration of
Satyam and other related marks as trademarks in
India, the United States and in other jurisdictions where we
carry on business. We currently require our technical associates
to enter into non-disclosure and assignment of rights agreements
to limit use of, access to and distribution of confidential and
proprietary information. We cannot assure you that the steps
taken by us in this regard will be adequate to prevent
misappropriation of confidential and proprietary information or
that we will be able to detect unauthorized use and take
appropriate steps to enforce our intellectual property rights.

Although we believe that our services and
products do not infringe upon the intellectual property rights
of others, we cannot assure you that such a claim will not be
asserted against us in the future. Assertion of such claims
against us could result in litigation, and we cannot assure you
that we would prevail in such litigation or be able to obtain a
license for the use of any infringed intellectual property from
a third party on reasonable commercial terms.

We expect that the risk of infringement claims
against us will increase if more of our competitors are able to
obtain patents for software products and processes. Any such
claims, regardless of their outcome, could result in substantial
cost to us and divert managements attention from our
operations. In the future, litigation may be necessary to
enforce our intellectual property rights or to determine the
validity and scope of the proprietary rights of others. Any
infringement claim or litigation against us could therefore
result in substantial costs and diversion of resources.

Indian laws limit our ability to raise
capital outside India and may limit the ability of others to
acquire us, which could prevent us from operating our business
or entering into a transaction that is in the best interests of
our shareholders.

Presently, Indian technology companies such as
ours are able to raise capital outside of India without the
prior approval of any Indian governmental authority through an
ADR or GDR issuance or an issuance of convertible debt
securities, subject with respect to convertible debt issuances
to a limit of $500 million in any fiscal year. Changes to
Indian foreign exchange laws may create restrictions on our
capital raising abilities. For example, a limit on the foreign
equity ownership of Indian technology companies may constrain
our ability to seek and obtain additional equity investment by
foreign investors. In addition, these restrictions, if applied
to us, may prevent us from entering into certain transactions,
such as an acquisition by a non-Indian company, which might
otherwise be beneficial for us and the holders of our equity
shares and ADSs.

Conditions in the Indian securities market
may affect the price or liquidity of our equity shares and our
ADSs.

The Indian securities markets are smaller and
more volatile than securities markets in more developed
economies. The Indian Stock Exchanges have in the past
experienced substantial fluctuations in the prices of listed
securities and the price of our equity shares has been
especially volatile. The high and low prices of our shares on
the BSE from fiscal 2001 until the latest practicable date are
set forth in the table below.

High

Low

Fiscal Year

Rs.

$ equivalent

Rs.

$ equivalent

2001

902.0

19.3

179.0

3.8

2002

331.2

6.8

111.0

2.3

2003

291.9

6.1

175.1

3.7

2004

391.0

9.0

127.3

2.9

2005

442.0

10.1

250.0

5.7

2006 (through May 9, 2005)

432.0

9.9

364.4

8.4

On May 9, 2005, the closing price of our
shares on the BSE was Rs.425.8 ($9.80). For comparison purposes,
these prices have been adjusted to give effect to our
August 25, 2000 five-for-one stock split. The prices of our
shares have been translated into U.S. dollars based on the
noon-buying rate as certified by the Federal Reserve Bank of New
York on the last date of each period presented.

The Indian Stock Exchanges have also experienced
problems that have affected the market price and liquidity of
the securities of Indian companies. These problems have included
temporary exchange closures, the suspension of stock exchange
administration, broker defaults, settlement delays and strikes
by brokers. In addition, the governing bodies of the Indian
Stock Exchanges have, from time to time, restricted securities
from trading, limited price movements and restricted margin
requirements. Moreover, from time to time, disputes have
occurred between listed companies and stock exchanges and other
regulatory bodies, which in some cases may have had a negative
effect on market sentiment. Similar problems could occur in the
future and, if they do, they could harm the market price and
liquidity of our equity shares and our ADSs.

It may be difficult for you to enforce any
judgment obtained in the United States against us or our
affiliates.

We are incorporated under the laws of the
Republic of India. Many of our directors and key managerial
personnel and some of the experts named in this document reside
outside the United States. In addition, virtually all of our
assets and the assets of many of these persons are located
outside the United States. As a result, you may be unable to:

(i)

effect service of process upon us outside India
or these persons outside the jurisdiction of their
residence; or

(ii)

enforce against us in courts outside of India or
these persons outside the jurisdiction of their residence,
judgments obtained in United States courts, including judgments
predicated solely upon the federal securities laws of the United
States.

We have been advised by our Indian counsel,
Crawford Bayley & Co., that the United States and India
do not currently have a treaty providing for reciprocal
recognition and enforcement of judgments (other than arbitration
awards) in civil and commercial matters. Therefore, a final
judgment for the payment of money rendered by any federal or
state court in the United States on civil liability, whether or
not predicated solely upon the federal securities laws of the
United States, would not be enforceable in India. However, the
party in whose favor such final judgment is rendered may bring a
new suit in a competent court in India based on a final judgment
which has been obtained in the United States. If and to the
extent Indian courts were of the opinion that fairness and good
faith so required, it would, under

current practice, give binding effect to the
final judgment which had been rendered in the United States
unless such a judgment was founded on a claim which breached the
laws of India.

You may be subject to Indian taxes arising
out of capital gains on the sale of the underlying equity
shares.

Generally, capital gains, whether short-term or
long-term, arising from the sale of the underlying equity shares
in India are subject to Indian capital gains tax. For the
purpose of computing the amount of capital gains subject to tax,
Indian law specifies that the cost of acquisition of the equity
shares will be deemed to be the share price prevailing on the
BSE or the NSE on the date the Depositary advises the custodian
to redeem receipts in exchange for underlying equity shares. The
period of holding of such equity shares, for determining whether
the gain is long-term or short-term, commences on the date of
the giving of such notice by our Depositary to the custodian.
With effect from October 1, 2004, any gains realized on the
sale of listed equity shares held for more than 12 months
to an Indian resident, or a non-resident investor in India, will
not be subject to Indian capital gains tax if the securities
transaction tax has been paid on the transaction. Investors are
advised to consult their own tax advisors and to consider
carefully the potential tax consequences of an investment in our
ADSs.

There may be less company information
available in Indian securities markets than securities markets
in other countries.

There is a difference between the level of
regulation and monitoring of the Indian securities markets and
the activities of investors, brokers and other participants and
that of markets in the United States and other developed
economies. SEBI is responsible for improving disclosure and
other regulatory standards for the Indian securities markets.
SEBI has issued regulations and guidelines on disclosure
requirements, insider trading and other matters. There may,
however, be less publicly available information about Indian
companies than is regularly made available by public companies
in developed economies.

Risk Related to our ADSs and this
Offering

Historically, our ADSs have traded at a
significant premium to the trading prices of our underlying
equity shares, a situation which may not continue.

Historically, our ADSs have traded on the NYSE at
a substantial premium to the trading prices of our underlying
equity shares on the Indian Stock Exchanges. Please see the
section entitled Market Price Information for the
underlying data. We believe that this price premium has resulted
from the relatively small portion of our market capitalization
represented by ADSs, restrictions imposed by Indian law on the
conversion of equity shares into ADSs, and an apparent
preference for some investors to trade
U.S. dollar-denominated securities. The completion of the
transactions described in this prospectus will significantly
increase the number of our outstanding ADSs. Further, over time,
some of the restrictions on the issuance of the ADSs imposed by
Indian law have been relaxed and we expect that other
restrictions may be relaxed in the future. As a result, the
historical premium enjoyed by ADSs as compared to equity shares
may be reduced or eliminated due to this offering or similar
transactions in the future, a change in Indian law permitting
further conversion of equity shares into ADSs or changes in
investor preferences.

You may be restricted in your ability to
exercise preemptive rights under Indian law and thereby may
suffer future dilution of your ownership position.

Under the Companies Act, 1956 of India, or the
Companies Act, a company incorporated in India must offer its
holders of equity shares preemptive rights to subscribe and pay
for a proportionate number of shares to maintain their existing
ownership percentages before the issuance of any new equity
shares, unless the preemptive rights have been waived by
adopting a special resolution by holders of three-fourths of the
shares which are voted on the resolution. As U.S. holders
of ADSs represent 10.6% of our outstanding equity shares as at
March 31, 2005, you may be unable to exercise preemptive
rights for equity shares underlying ADSs unless a registration
statement under the Securities Act of 1933, as

amended, or the Securities Act, is effective with
respect to the rights or an exemption from the registration
requirements of the Securities Act is available. Our decision to
file a registration statement will depend on the costs and
potential liabilities associated with any given registration
statement as well as the perceived benefits of enabling the
holders of our ADSs to exercise their preemptive rights and any
other factors that we deem appropriate to consider at the time
the decision must be made. We may elect not to file a
registration statement relating to preemptive rights otherwise
available by law to you. In the case of future issuances, the
new securities may be issued to our Depositary, which may sell
the securities for your benefit. The value, if any, our
Depositary would receive upon the sale of such securities cannot
be predicted. To the extent that you are unable to exercise
preemptive rights granted in respect of the equity shares
represented by your ADSs, your proportional interests in our
company would be reduced.

Holders of ADSs may be restricted in their
ability to exercise voting rights.

At our request, our Depositary will mail to you
any notice of shareholders meeting received from us
together with information explaining how to instruct our
Depositary to exercise the voting rights of the securities
represented by ADSs. If our Depositary timely receives voting
instructions from you, it will endeavor to vote the securities
represented by your ADSs in accordance with such voting
instructions. However, the ability of our Depositary to carry
out voting instructions may be limited by practical and legal
limitations and the terms of the securities on deposit. We
cannot assure you that you will receive voting materials in time
to enable you to return voting instructions to our Depositary in
a timely manner. Securities for which no voting instructions
have been received will not be voted.

Under Indian law, subject to the presence in
person at a shareholder meeting of persons holding equity shares
representing a quorum, all resolutions proposed to be approved
at that meeting are voted on by a show of hands unless a
shareholder present in person and holding at least 10% of the
total voting power or on which an aggregate sum of not less than
Rs.50,000 has been paid-up, at the meeting demands that a poll
be taken. Equity shares not represented in person at the
meeting, including equity shares underlying ADSs for which a
holder has provided voting instructions to our Depositary, are
not counted in a vote by show of hands. As a result, only in the
event that a shareholder present at the meeting demands that a
poll be taken will the votes of ADS holders be counted.
Securities for which no voting instructions have been received
will not be voted on a poll.

As a foreign private issuer, we are not subject
to the SECs proxy rules, which regulate the form and
content of solicitations by U.S.-based issuers of proxies from
their shareholders. To-date, our practice has been to provide
advance notice to our ADS holders of all shareholder meetings
and to solicit their vote on such matters through our
Depositary, and we expect to continue this practice. The form of
notice and proxy statement that we have been using does not
include all of the information that would be provided under the
SECs proxy rules.

An active or liquid trading market for our
ADSs is not assured.

While this offering will increase the number of
our ADSs publicly trading in the United States, an active,
liquid trading market for our ADSs may not be maintained in the
long term. We cannot predict the extent to which an active,
liquid public trading market for our ADSs will exist. Active,
liquid trading markets generally result in lower price
volatility and more efficient execution of buy and sell orders
for investors. The lack of an active, liquid trading market
could result in the loss of market makers, media attention and
analyst coverage. If there is no longer a market for our equity
shares, or if we fail to continue to meet eligibility
requirements, we may be required to delist from the NYSE and
this may cause our share prices to decrease significantly. In
addition, if there is a prolonged decline in the price of our
equity shares, we may not be able to issue equity securities to
fund our growth, which would cause us to limit our growth or to
incur higher cost funding, such as short-term or long-term debt.

Liquidity of a securities market is often a
function of the volume of the underlying shares that are
publicly held by unrelated parties. Although you are entitled to
withdraw the equity shares underlying the

ADSs from our Depositary at any time, there is no
public market for our equity shares in the United States.

The future sales of securities by our
company or existing shareholders may harm the price of our ADSs
or our equity shares.

The market price of our ADSs or our equity shares
could decline as a result of sales of a large number of ADSs or
equity shares or the perception that such sales could occur.
Such sales also might make it more difficult for us to sell ADSs
or equity securities in the future at a time and at a price that
we deem appropriate. As of March 31, 2005, we had an
aggregate of equity shares outstanding of 317,840,951 (excluding
1,424,340 equity shares held by the Satyam Associate Trust),
which includes underlying equity shares of 34,016,154
represented by 17,008,077 ADSs. In addition, as of
March 31, 2005, we had outstanding options to purchase
approximately 6,408,898 of our equity shares. All ADSs are
freely tradable, other than ADSs purchased by our affiliates.
The remaining equity shares outstanding may be sold in the
United States only pursuant to a registration statement under
the Securities Act or an exemption from the registration
requirements of the Securities Act, including Regulation S.

Satyam Computer Services Limited is a limited
liability company under the laws of India. Substantially all of
our directors and executive officers and certain experts named
in this prospectus reside outside the United States, and a
substantial portion of our assets and the assets of such persons
are located outside the United States. As a result, it may be
difficult for investors to effect service of process upon such
persons within the United States or to enforce against us or
such persons in U.S. courts judgments obtained in
U.S. courts, including judgments predicated upon the civil
liability provisions of the federal securities laws of the
United States.

India is not a party to any international treaty
in relation to the recognition or enforcement of foreign
judgments. We have been advised by our Indian legal counsel,
Crawford Bayley & Co., that in India the statutory
basis for recognition of foreign judgments is found in
Section 13 of the Indian Code of Civil Procedure 1908, or
the Civil Code, which provides that a foreign judgment shall be
conclusive as to any matter directly adjudicated upon except:
(i) where the judgment has not been pronounced by a court
of competent jurisdiction; (ii) where the judgment has not
been given on the merits of the case; (iii) where the
judgment appears on the face of the proceedings to be founded on
an incorrect view of international law or a refusal to recognize
the law of India in cases where such law is applicable;
(iv) where the proceedings in which the judgment was
obtained were opposed to natural justice; (v) where the
judgment has been obtained by fraud; or (vi) where the
judgment sustains a claim founded on a breach of any law in
force in India. Section 44A of the Civil Code provides that
where a foreign judgment has been rendered by a court in any
country or territory outside India which the Government of India
has by notification declared to be a reciprocating territory, it
may be enforced in India by proceedings in execution as if the
judgment had been rendered by the relevant court in India. The
United States has not been declared by the Government of India
to be a reciprocating territory for purposes of Section 44A
of the Civil Code. Accordingly, a judgment of a court in the
United States may be enforced in India only by a suit upon the
judgment, not by proceedings in execution. The suit must be
brought in India within three years from the date of the
judgment in the same manner as any other suit filed to enforce a
civil liability in India. It is unlikely that a court in India
would award damages on the same basis as a foreign court if an
action is brought in India. Furthermore, it is unlikely that an
Indian court would enforce foreign judgments if it viewed the
amount of damages awarded as excessive or inconsistent with
Indian practice. A party seeking to enforce a foreign judgment
in India is required to obtain approval from the RBI under the
Foreign Exchange Management Act, 1999 to execute such a judgment
or to repatriate any amount recovered. We have also been advised
by our Indian counsel that a party may file suit in India
against us, our directors or our executive officers as an
original action predicated upon the provisions of the federal
securities laws of the United States.

This prospectus contains forward-looking
statements, as defined in Section 27A of the
Securities Act, and Section 21E of the Exchange Act, that
are based on our current expectations, assumptions, estimated
and projections about our company and our industry. The
forward-looking statements are subject to various risks and
uncertainties. Generally, these forward-looking statements can
be identified by the use of forward-looking terminology such as
anticipate, believe,
estimate, expect, intend,
will, project, seek,
should, and similar expressions. Those statements
include, among other things, the discussions of our business
strategy and expectations concerning our market position, future
operations, margins, profitability, liquidity and capital
resources. We caution you that reliance on any forward-looking
statement involves risks and uncertainties, and that although we
believe that the assumptions on which our forward-looking
statements are based are reasonable, any of those assumptions
could prove to be inaccurate, and, as a result, the
forward-looking statements based on those assumptions could be
materially incorrect.

Actual results may differ materially from those
suggested by the forward-looking statements due to risks or
uncertainties associated with our expectations with respect to,
but not limited to, our ability to implement our strategy and
our growth and expansion. In addition, other factors that could
cause results to differ materially from those estimated by the
forward looking statements contained in this document include,
but are not limited to, general economic and political
conditions in India, Southeast Asia, and other countries which
have an impact on our business activities, changes in Indian and
foreign laws, regulations and taxes, changes in competition and
other factors beyond our control, including the factors
identified in the risk factors discussed elsewhere in this
prospectus. In light of these and other uncertainties, you
should not conclude that we will necessarily achieve any plans
and objectives or projected financial results referred to in any
of the forward-looking statements. We do not undertake to
release the results of any revisions of these forward-looking
statements to reflect future events or circumstances.

Under Indian law, a corporation pays dividends
upon the recommendation of the board of directors and approval
by a majority of the shareholders, who have the right to
decrease but not increase the amount of the dividend recommended
by the board of directors. Dividends may be paid out of profits
of an Indian company in the year in which the dividend is
declared or out of the undistributed profits of previous fiscal
years.

In fiscal 2005, we paid cash dividends of
Rs.4.80 per equity share. Although we have no current
intention to discontinue dividend payments, future dividends may
not be declared or paid and the amount, if any, thereof may be
decreased. Holders of ADSs will be entitled to receive dividends
payable on equity shares represented by such ADSs. Cash
dividends on equity shares represented by ADSs are paid to the
Depositary in Indian rupees and are generally converted by the
Depositary into U.S. dollars and distributed, net of
depositary fees, taxes, if any, and expenses, to the holders of
such ADSs.

Translations from Indian rupees to
U.S. dollars are based on the noon buying rate as certified
by the Federal Reserve Bank of New York on the last date of each
period presented.

Dividend per equity

Dividend per equity

Fiscal year ended March 31,

share

share

Dividend per ADS

2002

Rs. 0.94

$

0.02

$

0.02

(1)

2003

Rs. 1.50

$

0.03

$

0.06

2004

Rs. 3.40

$

0.08

$

0.17

2005

Rs. 4.80

$

0.12

$

0.24

(1)

Holders of ADSs were entitled to receive only the
interim dividends during fiscal 2002.

Our outstanding equity shares are currently
listed and traded on the BSE and the NSE . For information
regarding conditions in the Indian securities markets, see also
Risk Factors  Risks Related to Investments in
Indian Companies  Conditions in the Indian securities
market may affect the price or liquidity of our equity shares
and our ADSs.

As of March 31, 2005, 317,840,951 equity
shares were outstanding (excluding 1,424,340 equity shares held
by the Satyam Associate Trust). The prices for equity shares as
quoted in the official list of each of the Indian Stock
Exchanges are in Indian rupees.

The following table sets forth for the periods
indicated: (1) the reported high and low sale prices quoted
in Indian rupees for our equity shares on the BSE; and
(2) the imputed high and low sale prices for the equity
shares based on such high and low sales prices, translated into
U.S. dollars based on the noon buying rate as certified by
the Federal Reserve Bank of New York on the last date of each
period presented.

Data derived from the BSE website. The prices and
volumes quoted on the NSE may be different.

(2)

For comparative purposes, the price per equity
share data above is adjusted for the September 1, 1999
two-for-one stock split which took effect on the BSE on
August 16, 1999 and the August 25, 2000 five-for-one
stock split which took effect on the BSE on August 7, 2000.

On March 31, 2005, the closing price of
equity shares on the BSE was Rs.408.5 equivalent to $9.36 per
equity share ($18.73 per ADS on an imputed basis).

As of March 31, 2005, there were
approximately 110,684 holders of record of equity shares, of
which 126 had registered addresses in the United States and held
an aggregate of approximately 487,500 equity shares.

ADSs

Our ADSs, each representing two equity shares,
were issued in May 2001 in a public offering and are listed and
traded on the NYSE under the symbol SAY.

As of March 31, 2005, we had 17,008,077
ADSs, equivalent to 34,016,154 equity shares, outstanding. At
this date, there were 10 record holders of our ADSs, all of
which have registered addresses in the United States.

Our ADSs commenced trading on the NYSE on
May 15, 2001, at an initial offering price of
$9.71 per ADS. The following table sets forth, for the
periods indicated, the reported high and low closing prices on
the NYSE for our outstanding ADSs.

The information in this section has been
extracted from publicly available documents from various
sources, including officially prepared materials from the SEBI,
the BSE and the NSE.

Listing

The SEBI has promulgated regulations creating an
independent self regulatory authority called the Central Listing
Authority. No stock exchange can consider a listing application
unless it is accompanied by a letter of recommendation from the
Central Listing Authority.

Indian Stock Exchanges

The major stock exchanges in India, the BSE and
the NSE, account for a majority of trading volumes of securities
in India. The BSE and NSE together dominate the stock exchanges
in India in terms of number of listed companies, market
capitalization and trading.

The stock exchanges in India operate on a trading
day plus two, or T+2, rolling settlement system. At the end of
the T+2 period, obligations are settled with buyers of
securities paying for and receiving securities, while sellers
transfer and receive payment for securities. For example, trades
executed on a Monday would typically be settled on a Wednesday.
The SEBI has proposed to move to a T+1 settlement system. In
order to contain the risk arising out of the transactions
entered into by the members of various stock exchanges either on
their own account or on behalf of their clients, the stock
exchanges in India have designed risk management procedures,
which include compulsory prescribed margins on the individual
broker members, based on their outstanding exposure in the
market, as well as stock-specific margins from the members.

To restrict abnormal price volatility, SEBI has
instructed stock exchanges to apply the following price bands
calculated at the previous days closing price (there are
no restrictions on price movements of index stocks):

Market wide circuit
breakers. Market wide circuit breakers
are applied to the market for movement by 10%, 15% and 20% for
two prescribed market indices: the BSE Sensex for the BSE and
the Nifty for the NSE. If any of these circuit breaker
thresholds are reached, trading in all equity and equity
derivatives markets nationwide is halted.

Price bands. Price
bands are circuit filters of up to 20% movements either up or
down, and are applied to most securities traded in the markets,
excluding securities included in the BSE Sensex and the NSE
Nifty and derivatives products. The equity shares of Satyam are
included in the BSE Sensex and the NSE Nifty.

The National Stock Exchange of India
Limited

The market capitalization of the capital markets
(equities) segment of the NSE as of March 31, 2005 was
approximately Rs.15.9 trillion or approximately
$363 billion. The clearing and settlement operations of the
NSE are managed by its wholly-owned subsidiary, the National
Securities Clearing Corporation Limited. Funds settlement takes
place through designated clearing banks. The National Securities
Clearing Corporation Limited interfaces with the depositaries on
the one hand and the clearing banks on the other to provide
delivery versus payment settlement for depositary-enabled trades.

The Stock Exchange, Mumbai

The estimated aggregate market capitalization of
stocks trading on the BSE as of March 31, 2005 was
approximately Rs.17.0 trillion or approximately
$389 billion. The BSE began allowing online trading in May
1995. As of December 31, 2004, the BSE had 771 members,
comprising 202 individual members, 550 Indian companies and 19
foreign institutional investors. Only a member of the stock
exchange has the right to execute trades in the stocks listed on
the stock exchange.

Trading on both the NSE and the BSE occurs Monday
through Friday, between 9:55 a.m. and 3:30 p.m.
(Indian Standard Time).

Derivatives

Trading in derivatives in India takes place
either on separate and independent derivatives exchanges or on a
separate segment of an existing stock exchange. The derivative
exchange or derivative segment of a stock exchange functions as
a self-regulatory organization under the supervision of the SEBI.

Depositories

The National Securities Depository Limited and
the Central Depository Services (India) Ltd. are the two
depositories that provide electronic depository facilities for
trading in equity and debt securities in India. The SEBI
mandates a company making a public or rights issue or an offer
for sale to enter into an agreement with a depositary for
dematerialization of securities already issued or proposed to be
issued to the public or existing shareholders. The SEBI has also
provided that the issue and allotment of shares in initial
public offerings and/or the trading of shares shall only be in
electronic form.

Recently, a securities transaction tax, or STT,
was implemented. Under Indian tax law, a transaction tax is
levied on delivery-based transactions in equity shares in a
company or in units of an equity oriented fund on recognized
stock exchanges at the rate of 0.15% of the value of the
security. The transaction tax is required to be shared equally
between the buyer and the seller. For non-delivery based
transactions, a lower rate of 0.015% to be adjusted against
business profits will be applicable. For derivatives, the tax
will be 0.01%. Debt market transactions have been exempted from
the securities transaction tax. Sale of a unit of an
equity-oriented fund to a mutual fund will attract a transaction
tax of 0.15%. See Taxation for a further description
of the securities transaction tax and capital gains treatment
under Indian law.

The following table sets forth, as of
March 31, 2005, our cash and cash equivalents, investments
in bank deposits and capitalization prepared in accordance with
U.S. GAAP. This table should be read in conjunction with,
and is qualified by reference to, our financial statements and
the related notes included elsewhere in this prospectus.

Translations from Indian rupees to
U.S. dollars are based on the noon buying rate of
Rs.43.62 per $1.00 in the City of New York on
March 31, 2005 for cable transfers in Indian rupees as
certified for customs purposes by the Federal Reserve Bank of
New York.

Fluctuations in the exchange rate between the
Indian rupee and the U.S. dollar will affect the
U.S. dollar equivalent of the Indian rupee price of our
equity shares on the Indian Stock Exchanges and, as a result,
will likely affect the market price of our ADSs in the United
States, and vice versa. Such fluctuations will also affect the
U.S. dollar conversion by the Depositary of any cash
dividends paid in Indian rupees on the equity shares represented
by the ADSs.

We conduct operations in 45 countries around the
world. As a result, our net income in Indian rupee terms and the
presentation thereof in U.S. dollars can be significantly
affected by movements in currency exchange rates, in particular
the movement of the Indian rupee against the U.S. dollar.

The following table sets forth, for the fiscal
years indicated, information concerning the number of Indian
rupees for which one U.S. dollar could be exchanged based
on the average of the noon buying rate in the City of New York
on the last day of each month during the period for cable
transfers in Indian rupees as certified for customs purposes by
the Federal Reserve Bank of New York:

Fiscal Year

Period End(1)

Average(1)(2)

High

Low

2001

Rs. 46.85

Rs. 45.88

Rs. 47.47

Rs. 43.63

2002

48.83

47.81

48.91

46.58

2003

47.53

48.36

49.07

47.53

2004

43.40

45.78

47.46

43.40

2005

43.62

44.87

46.45

43.27

2006 (through May 9, 2005)

43.45

43.47

43.72

43.33

(1)

The noon buying rate at each period end and the
average rate for each period differed from the exchange rates
used in the preparation of our financial statements.

(2)

Represents the average of the noon buying rate on
the last day of each month during the period.

The following table sets forth the high and low
exchange rates for the months indicated and is based on the noon
buying rate in the City of New York on the last business day of
each month during the period for cable transfers in Indian
rupees as certified for customs purposes by the Federal Reserve
Bank of New York:

The following selected consolidated historical
financial data should be read in conjunction with, and are
qualified by reference to, our financial statements and the
related notes and Managements Discussion and
Analysis of Financial Condition and Results of Operations
included elsewhere in this prospectus and our other reports
filed with the SEC which have been incorporated herein by
reference. The statement of operations data for the five years
ended March 31, 2005 and the balance sheet data as of
March 31, 2005, 2004, 2003, 2002 and 2001 are derived from
our consolidated audited financial statements including the
notes, which have been prepared and presented in accordance with
U.S. GAAP. The statement of operations data for the three
years ended March 31, 2003 and the balance sheet data as of
March 31, 2003, 2002 and 2001 is as restated to give effect
to the restatement of shareholders equity and net income
to reflect the impact on deferred tax liabilities and income
taxes of our equity in the losses of Sify. As of
December 9, 2002, we ceased to hold a controlling interest
in Sify and subsequently changed the method of accounting for
our interest in Sify from the consolidated accounting method to
the equity method. Consequently, financial data as of
March 31, 2005, 2004 and 2003 and for the years ended
March 31, 2005 and 2004 reflect our interest in Sify
accounted for under the equity method and are not comparable to
the financial data as of March 31, 2002 and 2001 and for
the years ended March 31, 2003, 2002 and 2001 which reflect
our interest in Sify accounted for on a consolidated basis.

Year Ended March 31,

2005

2004

2003

2002

2001

(dollars in thousands, except per share and per ADS data, or as stated

Includes common stock and additional paid-in
capital but excludes shares held by Satyam Associate Trust.

SFAS 142 pro forma disclosure

Effective April 1, 2002, Satyam adopted
SFAS 142, Goodwill and Other Intangible Assets. Due
to the adoption of SFAS 142, Satyam ceased amortizing
goodwill. The effect of this accounting change is reflected
prospectively. The following pro forma disclosure presents the
impact of SFAS 142 on net income/(loss), net income/(loss)
per share, and the related tax effect had the standard been in
effect for the years ended March 31, 2002 and 2001:

Year Ended March 31

2002

2001

(dollars in thousands, except

per share amounts)

Reported net income/(loss)

$

42,357

$

(21,429

)

Add:

Goodwill amortization

16,997

24,728

Amortization of excess of cost of investment over
equity in net assets of associated companies

Investors are cautioned that this discussion
contains forward-looking statements that involve risks and
uncertainties. When used in this discussion, the words
anticipate, believe,
estimate, expect, intend,
project, seek, should,
will and other similar expressions as they relate to
us or our business are intended to identify such forward-looking
statements. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of
new information, future events or otherwise. Actual results,
performances or achievements could differ materially from those
expressed or implied in such forward-looking statements. Factors
that could cause or contribute to such differences include those
described under the heading Risk Factors in this
prospectus. Investors are cautioned not to place undue reliance
on these forward-looking statements, as they speak only as of
the date of this prospectus. The following discussion and
analysis should be read in conjunction with our financial
statements included herein and the notes thereto.

Overview

We are a global IT solutions provider, offering a
comprehensive range of IT services to our customers, including
application development and maintenance, consulting and
enterprise business solutions, extended engineering solutions,
infrastructure management services, as well as BPO. In addition
to our core IT services business conducted primarily through
Satyam, we provide our BPO services through our majority-owned
subsidiary, Nipuna. We are the fourth largest Indian IT software
and services provider in India, based on the amount of export
revenues generated during our fiscal year ended March 31,
2004. Our total revenues for fiscal 2005 were
$793.6 million and over the past three fiscal years our
revenues have grown at a compound annual growth rate of 24.2%.

We believe customers are increasingly demanding
full-service IT providers that have expertise in both existing
systems and new technologies, access to a large pool of
highly-skilled technical personnel and the ability to service
customers globally at competitive rates. To meet these
requirements, we offer our customers an integrated global
delivery model, which we refer to as the RightSourcing
Model, to provide flexible delivery alternatives to our
customers through our offshore centers located in India, offsite
centers which we have established in our major markets,
nearshore centers located geographically near our
customers premises and through our onsite teams operating
at our customers premises. In addition, we use the
expertise resident in our focused industry groups to provide
specialized services and solutions to our customers in the
manufacturing, banking and financial services, insurance, TIMES,
healthcare, retail and transportation industries.

Our revenues and profitability have grown rapidly
in recent years. In fiscal 2005, total revenues increased by
40.1%, as compared to fiscal 2004. Our revenues grew to
$793.6 million in fiscal 2005 from $566.4 million in
fiscal 2004. Our revenue and profitability growth is
attributable to a number of factors related to the expansion of
our business, including increase in the volume of projects
completed for our widening customer base, increase in our
associate numbers, increased growth in our consulting and
enterprise business solutions business and a strengthening of
our customer base in North America and Europe. Our growth has
continued despite increasing pressure for higher wages for our
associates coupled with pressure for lower prices for our
customers. In fiscal 2005, 2004 and 2003, our five largest
customers accounted for 29.2%, 36.4% and 38.4%, respectively, of
our total revenues. As of March 31, 2005, we had 20,690
employees (including employees of Nipuna), whom we refer to as
associates, worldwide as compared to 14,456 associates as of
March 31, 2004. With our continuing geographical expansion
we now have five offshore facilities in India and 15 overseas
facilities located in Australia, Canada, China, Hungary, Japan,
Malaysia, Singapore, United Arab Emirates, United Kingdom and
United States. We also have 17 sales and marketing offices
located in Canada, Germany, Italy, the Netherlands, Spain,
Sweden, United Kingdom and United States and 14 sales and
marketing offices in the rest of the world.

Our management evaluates our operating results
primarily based on two business segments: IT services and BPO.
Our business has also involved a third business segment,
software products, but

revenues from this segment are no longer
meaningful and our management does not intend to evaluate this
segment going forward. Each of these segments is discussed below.



IT services:
We provide a comprehensive range of IT services, including
application development and maintenance, consulting and
enterprise business solutions, extended engineering solutions,
and infrastructure management services. We seek to be the single
service provider capable of servicing all of our customers
IT requirements. Our consulting and enterprise business
solutions includes services in the area of enterprise resource
planning, customer relationship management and supply chain
management, data warehousing and business intelligence,
knowledge management, document management and enterprise
application integration. We also assist our customers in making
their existing computing systems accessible over the Internet.



BPO: We
provide outsourced BPO services in areas such as human
resources, finance and accounting, customer care (such as voice,
email and chat) besides also providing industry-specific
transaction processing services. We target our BPO services at
the insurance, healthcare, banking and financial services,
transportation, tourism, manufacturing, automotive,
telecommunications, media, utilities and retail industries.
Revenues from this business segment currently do not constitute
a significant proportion of our total revenues; however, we
anticipate that this proportion will increase over time. Our BPO
services are offered through our majority-owned subsidiary,
Nipuna. As part of the investor rights and securities
subscription agreements which we have entered into with
Nipunas two other investors, we have agreed not to compete
with Nipuna. Pursuant to these agreements, we and our affiliates
are restricted from engaging in activities that are or could
directly or indirectly be competitive with the business of
Nipuna. Such activities include among others providing BPO,
soliciting existing or prospective customers of Nipuna to obtain
the services offered by Nipuna from other service providers and
investing in companies engaged in the same or similar business
as Nipuna. These non-compete restrictions apply until the
investors redeem all of their preference shares in Nipuna or
their equity interest in Nipuna falls below 5% after an initial
public offering.



Software
products: Through our subsidiary,
Vision Compass, Inc., or VCI, we had developed and marketed our
VisionCompass software product to customers for use as a
management tool to assess and help improve business performance.
On April 24, 2003, we decided to discontinue VCIs
operations and focus on our IT services and BPO businesses.
Although our VisionCompass product remains in use by certain of
our customers, we do not plan to introduce any new software
products or services through VCI and this business segment will
not be evaluated on a going-forward basis. VCI was formally
dissolved on March 24, 2004 and revenues from this business
segment are no longer meaningful.

Revenues

We generate revenues through fees for
professional services rendered and product development in our
three segments, namely, IT services, BPO services and software
products.

The following table sets forth the total revenues
(excluding inter-segment revenues) for our three business
segments for the years indicated:

We discuss below the components of our IT
services revenues by technology type, contract type, offshore or
onshore designation, top customers and customer geography:

Revenues by technology

The vast majority of our revenues are generated
from our various IT service offerings. The following table
presents our IT services revenues (excluding inter-segment
revenues) by type of service offering for the years indicated:

Year Ended March 31,

2005

2004

2003

Technology type

Amount

%

Amount

%

Amount

%

(in millions, except percentages)

Application development and maintenance services

$

429.5

54.6

%

$

339.1

60.1

%

$

303.2

66.2

%

Consulting and enterprise business solutions

269.7

34.3

179.9

31.8

115.9

25.3

Extended engineering solutions

55.2

7.0

20.9

3.7

15.6

3.4

Infrastructure management services

32.3

4.1

25.1

4.4

23.6

5.1

Total

$

786.7

100.0

%

$

565.0

100.0

%

$

458.3

100.0

%

Revenues by contract type

Our IT services are provided on a
time-and-material basis or on a fixed-price basis. Revenues from
IT services provided on a time-and-material basis are recognized
in the period that the services are performed. Revenues from IT
services provided on a fixed-price basis are recognized under
the percentage of completion method of accounting and are
recorded when we can reasonably estimate the time period to
complete the work. The percentage of completion estimates are
subject to periodic revisions and the cumulative impact of any
revision in the estimates of the percentage of completion is
reflected in the period in which the changes become known to us.
Although we have revised our project completion estimates from
time to time, such revisions have not materially affected our
reported revenues to date. In recent years, we have experienced
some pricing pressure from our customers, which has had a
negative impact on margins. In response to current market
trends, we are considering the viability of introducing
performance-based or variable-pricing contracts. In the near
term, we expect that revenue from fixed-price contracts will
continue to increase as current market trends indicate a
customer preference towards fixed-price contracts.

The following table presents our IT services
revenues (excluding inter-segment revenues) by type of contract
for the years indicated:

Year Ended March 31,

2005

2004

2003

Contract type

Amount

%

Amount

%

Amount

%

(in millions, except percentages)

Time and material basis

$

517.3

65.8

%

$

386.1

68.3

%

$

332.2

72.5

%

Fixed-price basis

269.4

34.2

178.9

31.7

126.1

27.5

Total

$

786.7

100.0

%

$

565.0

100.0

%

$

458.3

100.0

%

Revenues based on offshore and
onsite/offsite

We provide our IT services through a combination
of (i) offshore centers located throughout India,
(ii) teams working onsite at a customers location,
(iii) nearshore centers located in Canada, China and
Hungary to service U.S.-based, Asia Pacific based and Europe
based customers, respectively, and (iv) offsite centers
located in Australia, Canada, China, Hungary, Japan, Malaysia,
Singapore, United Arab Emirates, United Kingdom and United
States. Offshore IT services revenues consist of revenues earned
both from IT services work conducted at our offshore centers in
India as well as onsite work conducted at customers
premises which is related to offshore work. Offshore IT services
revenues do not

include revenues from our offsite or nearshore
centers located outside of India or revenues from onsite work
which is not related to any offshore work. These later revenues
are included in onsite/offsite revenues.

We generally charge higher rates and incur higher
compensation expenses for work performed by our onsite teams at
our customers premises or at our offsite and nearshore
centers, as compared to work performed at our offshore centers
in India. Services performed by our onsite teams or at our
offsite centers typically generate higher revenues per capita,
but at a lower gross margin, than the same amount of services
performed at our offshore centers in India.

The following table presents our IT services
revenues (excluding inter-segment revenues) based on the
location where services are performed for the years indicated:

Year Ended March 31,

2005

2004

2003

Location

Amount

%

Amount

%

Amount

%

(in millions, except percentages)

Offshore

$

327.1

41.6

%

$

248.2

43.9

%

$

215.2

47.0

%

Onsite/ Offsite

459.6

58.4

316.8

56.1

243.1

53.0

Total

$

786.7

100.0

%

$

565.0

100.0

%

$

458.3

100.0

%

Revenues by top customers

Our top two customers accounted for 18.3% of our
IT services revenues in fiscal 2005, as compared to 24.2% and
24.9% of our IT services revenues in fiscal 2004 and 2003,
respectively. Our top five customers accounted for 29.5% of IT
services revenues in fiscal 2005 as compared to 36.5% and 38.4%
of our IT services revenues in fiscal 2004 and 2003,
respectively.

Revenues based on customer
location

We have experienced increasing volumes of
business from customers located in North America and Europe,
attributable to both new customers and additional business from
existing customers. At the same time, we have experienced
declining revenues from customers in India, due in part to
Sifys revenues no longer being consolidated in our
financial results. We expect that most of our revenues will be
generated in North America followed by Europe in fiscal 2006.

The following table gives the composition of our
IT services revenues based on the location of our customers for
the years indicated:

The principal component of our cost of revenues
is the wage cost of our technical associates. Wage cost in
India, including in the IT services industry, has historically
been significantly lower than wage cost in the United States and
Europe for comparably skilled professionals. However, as wages
in India increase at a faster rate than in the United States, we
may experience increases in our costs of personnel, particularly
project managers and other mid-level professionals.

The utilization levels of our technical
associates also affect our revenue and gross profits. We
calculate utilization levels on a monthly basis, based on the
ratio of the actual number of hours billed by technical
associates in such month to the total number of billable hours.
For purposes of such calculation, we assume that an associate is
100.0% utilized if he or she works 157 hours per month. We
manage utilization by monitoring project requirements and
timetables. The number of associates assigned to a project will
vary according to size, complexity, duration, and demands of the
project. The utilization levels for our technical associates
have been increasing in recent periods, mainly on account of new
business and an increase in business from existing customers,
and we expect this trend to continue in the near future.

Selling, general and administrative
expenses

Selling, general and administrative expenses
generally include compensation costs of sales, management and
administrative personnel, travel costs, advertising, business
promotion, depreciation on assets, application software costs,
rent, repairs, electricity and other general expenses not
attributable to cost of revenues.

Subsidiaries and Sify

We currently have three consolidated
subsidiaries, Nipuna, Satyam Technologies Inc, (formerly Satyam
Manufacturing Technologies Inc.), or STI and Satyam Computer
Services (Shanghai) Company Limited, or Satyam Shanghai, each of
which is majority-owned by us and is consolidated in our
consolidated financial statements. Our Satyam Shanghai
subsidiary is a newly incorporated company. Our subsidiary,
Satyam Europe Limited, had no material operations in fiscal 2005
and was dissolved in March 2005.

In addition to our majority-owned subsidiaries,
as of March 31, 2005, we owned 31.6% of the equity shares
of Sify. In December 2002, we started accounting for our
interest in Sify under the equity method of accounting, since we
no longer held a controlling interest in that company. We are
under no future obligation to invest additional funds in Sify
and at the moment we have no plans to do so. In September 2003
we sold 1,000,000 of our total holding of Sify equity shares at
a price of $4.35 (Rs.198.90) in Sifys sponsored sale of
4,600,200 of its unlisted Indian equity shares through a
secondary issue of Sifys ADSs.

Income Taxes

The statutory corporate income tax rate in India
is currently 35.0%. This tax rate is presently subject to a 2.5%
surcharge. The amount of tax and surcharge payable is further
subject to a 2.0% education cess, resulting in an effective tax
rate of 36.6%. The provision for foreign taxes is due to income
taxes payable in overseas tax jurisdictions by our offsite,
nearshore and onsite centers, principally in the United States.
We benefit from tax incentives provided to software entities as
an exemption from payment of Indian corporate income taxes until
the earlier of fiscal 2009 or 10 consecutive years of operations
of software development facilities designated as Software
Technology Parks, or STP units. The benefits of this tax
incentive have historically resulted in our effective tax rate
being well below statutory rates. The exemption for our STP
units was reduced from 100% to 90% for the fiscal 2003, and is
expected to expire between fiscal 2006 and fiscal 2010. We also
earn certain other foreign income and domestic income, which are
taxable irrespective of the tax holiday as stated above.

Our subsidiaries are subject to income taxes of
the countries in which they operate. Our subsidiaries
operating loss carried forward for tax purposes amounted to
approximately $21.1 million as of March 31, 2005,
which is available as an offset against future taxable income of
such entities. These carried forward amounts expire at various
dates primarily over eight to twenty years. Realization is
dependent on such subsidiaries generating sufficient taxable
income prior to expiration of the loss carried forward. A
valuation allowance is established attributable to deferred tax
assets and losses carried forward in subsidiaries where, based
on available evidence, it is more likely than not that they will
not be realized. Currently, a full valuation allowance has been
made for such losses.

Income/(loss) before income taxes and equity in
earnings (losses) of associated companies

180,158

22.7

137,035

24.2

84,324

18.4

Income taxes

(25,304

)

(3.2

)

(22,544

)

(4.0

)

(9,769

)

(2.1

)

Minority interest









11,082

2.4

Equity in earnings (losses) of associated
companies, net of taxes

(1,094

)

(0.1

)

(2,631

)

(0.5

)

(3,339

)

(0.7

)

Net income/(loss)

$

153,760

19.4

%

$

111,860

19.8

%

$

82,298

17.9

%

Depreciation

$

25,049

3.2

%

$

24,397

4.3

%

$

33,576

7.3

%

Stock-based compensation

1,968

0.2

1,625

0.3

4,521

1.0

(1)

Inclusive of stock-based compensation expenses of
$775 thousand, $853 thousand and $1,591 thousand during the
years ended March 31, 2005, 2004 and 2003, respectively, in
the IT services segments.

(2)

Inclusive of stock-based compensation expenses of
$1,193 thousand, $772 thousand and $2,930 thousand during the
years ended March 31, 2005, 2004 and 2003, respectively, in
the IT services segments.

Comparison of results for fiscal 2005 and
fiscal 2004

Revenues. Our
revenues increased by 40.1% to $793.6 million in fiscal
2005 from $566.4 million in fiscal 2004. This revenue
growth of $227.2 million in fiscal 2005 was primarily the
result of an increase in business both from existing customers
and new customers. Revenues from existing customers increased by
42.4% to $731.2 million in fiscal 2005 from
$513.6 million in fiscal 2004. Revenues from new customers
increased by 18.2% to $62.4 million in fiscal 2005 from
$52.8 million in fiscal 2004. We added 108 customers
both in fiscal 2005 and 2004 including 17 and 25 from the
Fortune Global 500 and Fortune U.S. 500 list in fiscal 2005
and 2004, respectively.

During fiscal 2005, revenues from application
development and maintenance have grown by $90.4 million or
26.7%, revenues from consulting and enterprise business
solutions have increased by $89.8 million or 49.9%,
followed by revenues in extended engineering solutions and
infrastructure management services, which grew by
$34.3 million and $7.2 million or 164.1% and 28.7%
respectively.

Revenues from IT services (excluding
inter-segment revenues) provided on a time-and-materials basis
decreased to 65.8% in fiscal 2005 from 68.3% in fiscal 2004.
Revenues from IT services provided on a fixed-price basis
increased to 34.2% in fiscal 2005 from 31.7% in fiscal 2004. The
increase in fiscal 2005 for fixed-price contracts is primarily
due to the shift in customer preference regarding type of
contracts from time-and-material to fixed-price.

The onsite revenues in fiscal 2005 increased as a
result of new engagements in consulting and enterprise business
solutions, and the need for extensive interactions with
customers in the early stages of new engagements to understand
their business needs and create the relevant processes before we
move the appropriate portion of the work offshore. Revenues from
new customers increased by 18.2% to $62.4 million in fiscal
2005 from $52.8 million in fiscal 2004.

Of the total increase of $227.2 million in
total revenue in fiscal 2005, $127.5 million was on account
of increase in revenues from North America followed by
$53.9 million increase in revenue from Europe and
$31.8 million from the rest of the world; revenues in India
increased by $11.2 million and in Japan by
$2.8 million. Our increased business in North America and
Europe was due to new customers and additional business from
existing customers.

Cost of Revenues.
Cost of revenues increased by
47.5% to $506.8 million in fiscal 2005 from
$343.6 million in fiscal 2004. Cost of revenues represented
63.9% of revenues in fiscal 2005 and 60.7% in fiscal 2004. This
increase by $163.2 million was attributable primarily to
increases in associate compensation and benefits expenses,
traveling expenses, communication expenses, depreciation and
other expenses, attributable largely to an overall increase in
our business during this period. Associate utilization levels
for IT services were 82.1% and 81.4% in fiscal 2005 and 2004,
respectively. Associate compensation and benefits expenses
increased by 56.7% to $401.2 million, or 50.6% of revenues
in fiscal 2005 from $256.0 million, or 45.2% of revenues in
fiscal 2004. The increase in the associate compensation and
benefits is due to: (i) increase in the total number of
technical associates by 5,790 to 19,240 in fiscal 2005 from
13,450 in fiscal 2004; (ii) increase in number of onsite
technical associates by 845 to 4,301 in fiscal 2005 from 3,456
in fiscal 2004 for which we pay a higher compensation; and
(iii) an increase of existing salaries (approximately 17%)
during the period. Traveling expenses increased 23.3% to
$39.1 million, or 4.9% of revenues, in fiscal 2005 from
$31.7 million, or 5.6% of revenues, in fiscal 2004.
Communication expenses increased 37.3% to $7.0 million, or
0.9% of revenues in fiscal 2005 from $5.1 million in fiscal
2004. Other expenses comprised mainly of rent, power and fuel
and maintenance expenses. Other expenses increased by 27.9% to
$38.1 million, or 4.8% of revenues, in fiscal 2005 from
$29.8 million in fiscal 2004. Depreciation expense
increased 2.5% to $20.6 million, or 2.6% of revenues, in
fiscal 2005 from $20.1 million in fiscal 2004. Stock-based
compensation expense decreased by 8.8% to $775 thousand in
fiscal 2005 from $850 thousand in fiscal 2004.

Selling, general and administrative
expenses. Selling, general and
administrative expenses increased 22.3% to $124.3 million
in fiscal 2005 from $101.6 million in fiscal 2004. Selling,
general and administrative expenses represented 15.7% of
revenues in fiscal 2005 and 17.9% of revenues in fiscal 2004.
This increase of $22.7 million in fiscal 2005 was a result
primarily of increase in associate compensation and benefits for
non-technical associates, communication expenses, traveling
expenses and sales and marketing expenses. Associate
compensation and benefits increased 40.8% to $52.8 million,
or 6.7% of revenues, in fiscal 2005 as compared to
$37.5 million or 6.6% of revenues in fiscal 2004 primarily
on account of increase in number of non-technical associates to
1,450 from 1,006 and incentives amounting to $3.7 million
and salary increments (approximately 17%) given to associates
during the year. Communication expenses increased 35.0% to
$8.1 million or 1.0% of revenues in fiscal 2005 as compared
to $6.0 million or 1.1% of revenue in fiscal 2004.
Traveling expenses increased 5.7% to $9.2 million or 1.2%
of revenues in fiscal 2005 from $8.7 million or 1.5% of
revenue in fiscal 2004. Traveling expenses increased primarily
due to increase in travels by our non-technical associates.
Stock-based compensation expense increased 54.7% to
$1.2 million in fiscal 2005 from $771 thousand in fiscal
2004. Other expenses comprised primarily of depreciation,
professional charges, marketing expense, rent, power and fuel
and maintenance expenses. Other expenses increased 8.8% to
$53.0 million or 6.7% of revenue in fiscal 2005 from
$48.7 million, or 8.6% of revenues in fiscal 2004.

Operating income.
Our operating income was
$162.5 million in fiscal 2005, representing an increase of
34.2% over the operating income of $121.1 million for
fiscal 2004. As a percentage of revenues, operating income
decreased to 20.5% in fiscal 2005, from 21.4% in fiscal 2004.
This decrease in operating income as a percentage of revenue was
due to (i) increase in the associate compensation and
benefits expenses by $160.5 million to $454.0 million
or 57.2% of revenue in fiscal 2005 from $293.5 million, or
51.8% of revenues, in fiscal 2004 and (ii) offset by
decrease in the traveling, communication, depreciation and other
expenses.

Interest income.
Interest income increased to
$22.3 million in fiscal 2005 representing an increase of
9.9% from $20.3 million in fiscal 2004. This increase was
due to increase in deposits with banks by $79.5 million to
$411.6 million in fiscal 2005 from $332.1 million in
fiscal 2004.

Gain on sale of shares in associated
company/ others. In fiscal 2005,
gain on sale of investments was $66 thousand as compared to
$2,652 thousand in fiscal 2004. The gain of
$2,652 thousand in fiscal 2004 was primarily on account of
the gain on sale of 1,000,000 Indian equity shares of Sify
amounting to $2.6 million. Gain on sale of other
investments amounted to $66 thousand in fiscal 2005 as compared
to $46 thousand in fiscal 2004.

Gain/(loss) on foreign exchange
transactions. In fiscal 2005 and
fiscal 2004, 81.8% and 84.5% respectively, of our revenues were
generated in U.S. dollars. The average exchange rate of
Indian rupee to U.S. dollar in fiscal 2005 was Rs. 44.85
against Rs. 45.96 in fiscal 2004. As at March 31, 2005, the
Indian rupee depreciated to Rs. 43.62 against Rs. 43.40 at
March 31, 2004. As at March 31, 2004, the Indian rupee
appreciated to Rs. 43.40 against Rs. 47.53 as at March 31,
2003. As a result of the average exchange rate during fiscal
2005 being lower than during fiscal 2004, loss on foreign
exchange transactions was $4.6 million in fiscal 2005 as
compared to a loss of $8.9 million in fiscal 2004.

Other income/(expenses), net.
Other income was $326 thousand in
fiscal 2005, representing a decrease of 85.6 % from
$2.3 million in fiscal 2004. The decrease in the other
income is primarily on account of loss on forward and options
contracts amounting to $339 thousand in fiscal 2005 as compared
to a gain of $2.4 million in fiscal 2004. This decrease was
partly offset by increase in other income, net of other expenses
to $665 thousand in fiscal 2005 as compared to a loss of $91
thousand in fiscal 2004.

Income taxes.
Income taxes were
$25.3 million in fiscal 2005, representing an increase of
12.4% from $22.5 million in fiscal 2004.

Equity in earnings (losses) of associated
companies, net of taxes. Equity in
losses of associated companies was $1.1 million in fiscal
2005 as compared to $2.6 million in fiscal 2004. Equity in
losses of Sify and CA Satyam amounted to $1.7 million and
$63 thousand respectively in fiscal 2005 as compared to
$2.2 million and $398 thousand respectively in fiscal
2004. These losses were partially offset by equity in profit of
Satyam Venture amounting to $706 thousand in fiscal 2005 as
compared to equity in loss of $3 thousand in fiscal 2004.

Net income.
As a result of the foregoing, our
net income was $153.8 million in fiscal 2005, representing
an increase of 37.4% over net income of $111.9 million in
fiscal 2004. As a percentage of total revenues, net income
decreased to 19.4% in fiscal 2005 from 19.8% in fiscal 2004.

Comparison of results for fiscal 2004 and
fiscal 2003

Revenues. Our
total revenues increased by 23.3% to $566.4 million in
fiscal 2004 from $459.2 million in fiscal 2003. This growth
of $107.2 million or 23.3% in revenues in fiscal 2004 was
primarily the result of an increase in business from existing
customers and the generation of business from new customers.
Revenues from existing customers increased by 23.6% to
$513.6 million in fiscal 2004 from $415.5 million in
fiscal 2003. Revenues from new customers increased by 20.8% to
$52.8 million in fiscal 2004 from $43.7 million in
fiscal 2003. We added 108 and 100 customers including 25 and 27
from the Fortune Global 500 and Fortune U.S. 500 list
during fiscal 2004 and 2003, respectively.

During fiscal 2004, IT revenues from consulting
and enterprise business solutions grew by 55.2%, followed by
revenues from extended engineering solutions which grew by
34.0%. In absolute terms, revenues from consulting and
enterprise business solutions showed significant growth of
$64.0 million or 55.2%, revenues from application
development and maintenance increased by $35.9 million or
11.8%, followed by extended engineering solutions and
infrastructure management services, which grew by
$5.3 million and $1.5 million representing growth of
34.0% and 6.4%, respectively.

Revenues from IT services (excluding
inter-segment revenues) provided on a time-and-materials basis
decreased to 68.3% in fiscal 2004 from 72.5% in fiscal 2003 and
revenues from fixed-price basis increased to 31.7% in fiscal
2004 from 27.5% in fiscal 2003. The increase in fiscal 2004 for
fixed-price contracts is primarily due to a shift in type of
contracts from time-and-material to fixed-price since based on
the market trend, a majority of our customers preferred to enter
into fixed-price contracts.

The onsite percentage increased as a result of
new engagements during fiscal 2004.

Our ownership interest in Sify has been accounted
using the equity method since December 10, 2002. As a
result, revenues from Internet services were zero in fiscal 2004
as compared to $25.7 million in fiscal 2003.

Of the total increase of $107.2 million in
revenues in fiscal 2004, $79.0 million increased in North
America followed by $24.5 million in Europe. Revenues in
the rest of the world increased by $14.9 million and in
Japan by $635 thousand. This was partly offset by a decrease in
revenues in India by $11.8 million. Revenues in India
included revenue from Internet services of zero in fiscal 2004
and $23.1 million in fiscal 2003. This decline in revenues
in India is due to the fact that from December 10, 2002
Sify ceased to be a consolidated subsidiary.

Cost of
Revenues. Cost of revenues
increased by 24.8% to $343.6 million in fiscal 2004 from
$275.2 million in fiscal 2003. Cost of revenues represented
60.7% of revenues in fiscal 2004 and 59.9% in fiscal 2003. This
increase by $68.4 million was attributable primarily to
increases in associate compensation and benefits expenses and
traveling expenses. This increase was partially offset by a
decrease in depreciation expense and other expenses. Associate
utilization rates for IT services were 81.4% and 80.4% in fiscal
2004 and fiscal 2003, respectively. The utilization rate
increased on account of new business and an increase in business
from existing customers. Associate compensation and benefit
expenses increased 36.2% to $256.0 million, or 45.2% of
revenues, in fiscal 2004 from $187.9 million, or 40.9% of
revenues, in fiscal 2003. The increase in associate compensation
and benefits is due to: (i) an increase in the total number
of technical associates by 4,364 to 13,450 in fiscal 2004 from
9,086 in fiscal 2003; (ii) an increase in number of onsite
technical associates by 1,070 during fiscal 2004 to 3,456 for
which we pay higher compensation; and (iii) on account of
salary increase of 17.0% given to associates during the year.
Traveling expenses increased 22.9% to $31.7 million, or
5.6% of revenues, in fiscal 2004 from $25.8 million in
fiscal 2003. These increases were partially offset by a decrease
in stock-based compensation expense, communication expenses and
depreciation expense. Stock-based compensation expense decreased
by 43.8% to $0.9 million, or 0.2% of revenues, in fiscal
2004 from $1.6 million, or 0.3% of revenues, in fiscal 2003
as a majority of options granted had a vesting date until March
2003. Communication expense decreased by 60.5% to
$5.1 million, or 0.9% of revenues, in fiscal 2004 from
$12.9 million, or 2.8% of revenues, in fiscal 2003 on
account of communication expenses of Sify being included in
fiscal 2003. Depreciation expense decreased by 9.0% to
$20.1 million, or 3.5% of revenues, in fiscal 2004 from
$22.1 million, or 4.8% of revenues, in fiscal 2003.

Selling, general and administrative
expenses. Selling, general and
administrative expenses decreased by 13.1% to
$101.6 million in fiscal 2004 from $116.9 million in
fiscal 2003. Selling, general and administrative expenses
represented 17.9% of revenues in fiscal 2004 and 25.5% in fiscal
2003. This decrease was attributable primarily to a decrease in
depreciation, traveling expenses, stock-based compensation and
other expenses. Depreciation decreased by 70.3% to
$4.1 million, or 0.7% of revenues, in fiscal 2004 from
$13.8 million, or 3.0% of revenues, in fiscal 2003. The
decrease is primarily due to depreciation of $9.7 million
included in fiscal 2003 with respect to Sifys assets up to
December 9, 2002 after which it ceased to be our
subsidiary. Traveling expenses decreased 13.9% to
$8.7 million, or 1.5% of revenues, in fiscal 2004 from
$10.1 million, or 2.2% of revenues, in fiscal 2003.
Stock-based compensation expense decreased by 73.4% to
$0.77 million, or 0.1% of revenues, in fiscal 2004 from
$2.9 million, or 0.6% of revenues, in fiscal 2003. Other
expenses primarily comprised of rent, power and fuel, repairs
and maintenance and training and development. Other expenses
decreased by 18.4% to $25.3 million, or 4.5% of revenues,
in fiscal 2004 from $31.0 million, or 6.8% of revenues, in
fiscal 2003. This decrease was partially offset by an increase
in marketing expenses by 13.0% to $10.4 million in fiscal
2004 from $9.2 million in fiscal 2003.

Operating income
(loss). Our operating income was
$121.1 million for fiscal 2004, representing an increase of
44.9% over the operating income of $83.6 million for fiscal
2003. As a percentage of revenues, operating income increased to
21.4% for fiscal 2004, from 18.2% for fiscal 2003. This increase
was due to (i) a decrease in selling, general and
administrative expenses from 25.5% of revenue in fiscal 2003 to
17.9% of revenues in fiscal 2004 and (ii) an impairment of
other non-marketable investments of $3.3 million, or 0.7%
of revenues, during fiscal 2003. This increase was partially
offset by increase in our cost of revenues from 59.9% of
revenues in fiscal 2003 to 60.7% of revenues in fiscal 2004 and
due to a reversal of our put option charge in fiscal 2003 which
was $19.8 million, or 4.3% of revenues, in fiscal 2003.

Interest
income. Interest income increased
by 181.9% to $20.3 million in fiscal 2004 from
$7.2 million in fiscal 2003. This increase in interest was
due to (i) an increase in bank deposits from
$268.5 million at the end of fiscal 2003 to
$338.5 million at the end of fiscal 2004 and (ii) a
transfer of deposits placed in overseas banks to Indian banks
yielding higher interest.

Gain on sale of shares in
Sify. In September 2003, we sold
1,000,000 of our 12,182,600 Sify equity shares through
Sifys sponsored ADS program. The sale transaction was
privately negotiated and closed at a sale price of $4.35 or
Rs.198.9, per share. The difference between the carrying value
of the investment in Sify as of September 30, 2003 and the sales
proceeds amounting to $2.6 million has been accounted for
as a gain during the fiscal 2004 in our statement of operations.

Gain/ (loss) on foreign exchange
transactions. In fiscal 2004 and
fiscal 2003, 84.5% and 80.6%, respectively, of our revenues were
generated in U.S. dollars. The average exchange rate of the
Indian rupee to the U.S. dollar for fiscal 2004 was
Rs.45.96 against Rs.48.43 for fiscal 2003. As at March 31,
2004, the Indian rupee appreciated to Rs.43.40 to $1.00 against
Rs.47.53 as of March 31, 2003. On account of rupee
appreciation, our loss on foreign exchange transactions was
$8.9 million in fiscal 2004 as compared to a gain of
$4.8 million in fiscal 2003.

Other income/(expenses),
net. Other income increased by
35.3% to $2.3 million in fiscal 2004 as compared to other
expense of $1.7 million in fiscal 2003. This increase in
other income was due primarily to an increase in gains on
forward exchange contracts to $2.4 million in fiscal 2004
from $0.06 million in fiscal 2003.

Income taxes.
Income taxes were $22.5 million in fiscal 2004,
representing a 129.6% increase from $9.8 million in fiscal
2003. This increase in income taxes is primarily due to an
increase in our income taxable in the United States.

Minority
interest. Minority interest in
losses of subsidiaries was zero in fiscal 2004 and
$11.1 million in fiscal 2003. During fiscal 2003, minority
interest represented our minority holding in Sify. We
consolidated Sify up to December 9, 2002 after which it
ceased to be our subsidiary and subsequently accounted for our
interest in Sify using the equity method.

Equity in earnings (losses) of associated
companies. Equity losses of
associated companies were $2.6 million in fiscal 2004 as
compared to $3.3 million in fiscal 2003. This decrease was
due primarily to our reduced holding in Sify to 32.0% as at
March 31, 2004 from 37.2% as at March 31, 2003. Equity
in loss of Sify and its associated companies amounted to
$2.2 million in fiscal 2004 as compared to
$3.7 million in fiscal 2003. Equity in loss of CA Satyam
amounted to $398 thousand in fiscal 2004 as compared to $126
thousand in fiscal 2003. Equity in loss of Satyam Venture
amounted to $3 thousand in fiscal 2004 as compared to equity in
profit of $179 thousand in fiscal 2003. Equity in profit of
Satyam GE amounted to $238 thousand in fiscal 2003.

Net income.
As a result of the foregoing, our net income was
$111.9 million for fiscal 2004, representing an increase of
36.0% over net income of $82.3 million for fiscal 2003. As
a percentage of total revenues, net income increased to 19.8%
for fiscal 2004 from 17.9% for fiscal 2003.

Liquidity and Capital Resources

Net cash provided by operating
activities

Net cash provided by operating activities was
$171.2 million, $89.2 million and $98.5 million
in fiscal 2005, 2004 and 2003, respectively.

In fiscal 2005, non-cash adjustments to reconcile
the $153.8 million net income to net cash provided by
operating activities consisted primarily of depreciation expense
of $25.0 million and increase in net accounts receivable
and unbilled revenues. Net accounts receivable and unbilled
revenues increased by $40.7 million primarily as a result
of an increase in our revenues. Accounts payable and accrued
expenses increased by $19.6 million primarily on account of
an increase in taxes by $2.1 million and an increase in
sub-contracting charges payable by $5.0 million.

In fiscal 2004, non-cash adjustments to reconcile
the $111.9 million net income to net cash used in operating
activities consisted primarily of depreciation expense of
$24.4 million. Net accounts receivable and unbilled
revenues increased by $22.5 million primarily as a result
of an increase in our revenues. Increase in other working
capital assets of $25.4 million was primarily on account of
interest accrued on deposits placed with banks. Unearned and
deferred revenues increased because of advance billing on
customers for services to be rendered in future.

In fiscal 2003, non-cash adjustments to reconcile
the $82.3 million net income to net cash provided by
operating activities consisted primarily of depreciation and
amortization of license fees expense of $37.2 million. Net
accounts receivable and unbilled revenues increased by
$15.4 million primarily as a result of an increase in our
revenues and increase in the collection period. The increase in
other working capital assets of $7.3 million was primarily
on account of directors and officers liability insurance
taken during the year and interest accrued on deposits placed
with banks. Unearned and deferred revenues increased by
$3.5 million because of advance billing on customers for
services to be rendered in future.

Net cash used in investing
activities

Net cash used in investing activities in fiscal
2005 increased by $55.2 million to $115.4 million from
$60.2 million in fiscal 2004. This increase was primarily
due to increase in investments in bank deposits by
$33.9 million to $79.3 million in fiscal 2005 as
compared to $45.4 million in fiscal 2004, increase in
purchases of premises, plant and equipment by $22.2 million
to $39.0 million in fiscal 2005 from $16.8 million in
fiscal 2004, due to the purchase of land by Nipuna and purchase
of equipment, primarily infrastructure, computers and other
equipment associated with the expansion of new facilities at
Hyderabad, Bangalore and Chennai.

Net cash used in investing activities in fiscal
2004 decreased by $211.8 million to $60.2 million from
$272.0 million in fiscal 2003. This decrease was primarily
related to a decrease in investments in bank deposits and
acquisitions and investments in associate companies. Investments
made in bank deposits in fiscal 2004 were $45.4 million as
compared to $259.3 million in fiscal 2003. Net cash used
for acquisitions and investment in associate companies decreased
from $5.1 million in fiscal 2003 to zero in fiscal 2004.
These decreases were partially offset by an increase in purchase
of premises and equipment by $5.8 million in fiscal 2004.

Net cash used in investing activities in fiscal
2003 increased by $231.6 million to $272.0 million
from $40.4 million in fiscal 2002. This increase was
primarily related to investments in bank deposits of
$259.3 million. This increase was partially offset by a
decrease in the purchase of premises and equipment, acquisitions
and investments in associated companies. Purchase of premises
and equipment in fiscal 2002 consisted primarily of
infrastructure, computers and other equipment associated with
the expansion of our business.

Net cash provided by/ (used in) financing
activities

Net cash used in financing activities was
$12.9 million, $11.5 million and $12.1 million in
fiscal 2005, 2004 and 2003 respectively.

During fiscal 2005, $26.8 million was raised
from financing activities, primarily from issuance of preferred
stock (net of issuance costs) of $9.5 million by our
subsidiary, $15.3 million by associate stock options and
$1.7 million from short-term debt by our subsidiary. Cash
dividends paid amounted to $37.6 million in fiscal 2005 as
compared to $26.2 million in fiscal 2004.

During fiscal 2004, $20.5 million was raised
from financing activities, primarily from the issuance of
preferred stock (net of issuance costs) of $9.4 million by
our subsidiary and $9.3 million by associate stock options.
We used cash to repay loans amounting to $2.5 million and
to pay of dividend amounting to $26.2 million in fiscal
2004.

During fiscal 2003, $3.3 million was raised
from financing activities, primarily from associate stock
options of $1.9 million and long-term debts of
$1.4 million. We used cash to repay debts amounting to
$5.8 million and to pay dividend amounting to
$9.7 million in fiscal 2003.

As of March 31, 2005, we had cash and cash
equivalents of $129.8 million, rupee denominated loans from
the Satyam Associate Trust of $1.9 million secured by our
shares held by the Satyam Associate Trust, and other outstanding
loans of $2.4 million with maturities ranging from one to
three years. As of March 31, 2005, we had an unused working
capital line of credit of $3.4 million from banks, unused
long-term line of credit of $20 million from banks and
unused non-funded lines of credit of $14.1 million from
banks.

The following table describes our outstanding
credit facilities as of March 31, 2005.

Interest

Computation

Loan Type

Lenders

Amount outstanding

(per annum)

method

(dollars in thousands)

Rupee loan of Satyam Associates Trust

Cholamandalam

$

1,919

10.75%

Fixed

Export Packing Credit

BNP Paribas

1,685

6 month Libor+0.25%

Floating

Other loans

Various other parties

2,369

3%-10.5%

Fixed

Total

$

5,973

We anticipate capital expenditures of
approximately $50.0 million in fiscal 2006, principally to
finance construction of new facilities in our offshore centers,
expand facilities in offshore centers in India and establish
offsite centers outside India. We believe that existing cash and
cash equivalents and funds generated from operations will be
sufficient to meet these requirements. However, we may
significantly alter our proposed capital expenditures plans and
accordingly, may require additional financing to meet our
requirements. In either case, we cannot assure you that
additional financing will be available at all or, if available,
that such financing will be obtained on terms favorable to us or
that any additional financing will not be dilutive to our
shareholders.

We have guaranteed payment of all sums payable by
Nipuna to its two strategic investors, Olympus Capital and Intel
Capital, upon redemption of the $20 million preference
shares in Nipuna held by them. These preference shares are to be
mandatorily redeemed or converted into equity shares no later
than June 2007, if Nipuna achieves certain targets for revenues
and profits by March 31, 2006. If these targeted revenues
and profits are not achieved along with other triggering events,
the investors have an option to either redeem the preference
shares or convert them. Although certain triggering events for
early redemption as per the agreement have occurred during the
period January 2004 to March 2005, the investors waived their
right of early redemption. If not earlier converted, these
preference shares are redeemable on maturity in June 2007 at a
redemption premium, which could range between 7.5% to
13.5% per annum.

In addition, depending upon certain triggering
events, we may be required to subscribe to US$20 million in
convertible debentures of Nipuna which would be convertible upon
the election of Nipuna into ordinary shares at any time. On
January 6, 2005, Nipuna obtained approval from a bank for
long-term borrowings up to US$20 million with an interest
of 0.95% above a six-month LIBOR. This facility is available for
drawdown by Nipuna until September 30, 2005, and is
repayable within three years from the date of drawdown. We
expect that Nipuna will utilize this facility, and that we will
not therefore be required to subscribe to the convertible
debenture described above.

The following table sets forth our contractual
obligations and commitments to make future payments as of
March 31, 2005. The following table excludes our accounts
payable, accrued operating expenses and other current
liabilities which are payable in normal course of operations. We
believe that the conversion of the Nipuna preference shares is
more probable than redemption and therefore have not included
such

redemption and the redemption premium payable, if
redeemed as per the terms of the agreement, in the following
table. In addition, the following table does not include our
anticipated commitments to pay the purchase price for our
recently announced proposed acquisition of Citisoft (see
Summary  Recent Developments).

Payments due as at March 31, 2005

Within 1 year

1-3 years

3-5 years

After 5 years

Total

(dollars in thousands)

Long-term debt

$

3,151

$

1,137

$



$



$

4,288

Operating leases

4,351

5,652

762

587

11,352

Unconditional purchase obligations:

Other commercial commitments

8,801







8,801

Bank guarantees

2,738

2,638

490

2,320

8,186

Letters of credit

16







16

Gratuity Plan

324

1,010

2,282

8,711

12,327

Total contractual cash obligations

$

19,381

$

10,437

$

3,534

$

11,618

$

44,970

Based on past performance and current
expectations, we believe that our cash and cash equivalents,
short-term investments, and cash generated from operations will
satisfy our working capital needs, capital expenditures,
investment requirements, stock repurchases, commitments, and
other liquidity requirements associated with our existing
operations through at least the next 12 months. In
addition, there are no transactions, arrangements, and other
relationships with unconsolidated entities or other persons that
are reasonably likely to materially affect liquidity or the
availability of our requirements for capital resources.

Deferred Stock-based Compensation

We have three associate stock option plans: our
Associated Stock Option Plan, or ASOP, established in May 1998;
our Associated Stock Option Plan B, or ASOP B, established in
May 1999; and our Associated Stock Option Plan ADS, or ASOP ADS,
established in May 1999. We also have the Employee Stock Option
Plan, or ESOP, established by Nipuna in April 2004.

ASOP

We account for the ASOP as a fixed plan in
accordance with Accounting Principles Board, or APB, Opinion
No. 25. Under U.S. GAAP, the difference between the
exercise price and the market price on the date the warrants are
granted to associates is required to be recognized as a non-cash
compensation charge and amortized over the vesting period of the
equity shares underlying the warrants. Under U.S. GAAP, in
fiscal 2005 and 2004, we recognized deferred stock-based
compensation of $2.2 million and $776 thousand, and
amortized and charged to earnings $2.0 million and
$1.6 million during the same periods, respectively.

ASOP B

The ASOP B is substantially similar to the ASOP
and is administered by the compensation committee of our board
of directors. The SEBI guidelines define the exercise price as
the price payable by the employee for exercising the option
granted to him in pursuance of the stock option plan. In
determining the exercise price, we opted for the higher of
(a) the closing price of the shares on the date of the
meeting of the compensation committee convened to grant the
stock options, on the stock exchange where highest volumes are
traded, or (b) the average of the two weeks high and low
price of the share preceding the date of grant of option on the
stock exchange on which the shares of the company are listed.
Under U.S. GAAP, in fiscal 2005 and 2004, we recognized
deferred stock-based compensation of $(28) thousand and
$(14) thousand and amortized and charged to earnings $(27)
thousand and $27 thousand during the same periods,
respectively. We do not expect to recognize amortization of
deferred stock-based compensation in respect of these granted
options in fiscal 2006 and fiscal 2007. We account for the ASOP
B as a fixed option plan.

Under ASOP ADS, we periodically issue grants to
eligible associates to purchase ADSs. We account for the ASOP
ADS as a fixed option plan.

Nipuna ESOP

Under the Nipuna ESOP options are granted at fair
value to associates as determined by an independent valuer as of
the date of grant. We account for the Nipuna ESOP as a fixed
option plan. We expect that the exercise prices of options
granted in the future under the plan will not be less than the
fair market value and therefore we do not expect to incur
compensation expense with respect to those future grants under
current accounting rules.

Effect of
recently issued accounting pronouncements

On December 16, 2004, the FASB issued
FAS 123R, Share-Based Payment, an amendment of FASB
Statements No. 123 and 95, that addressed the
accounting for share-based payment transactions in which an
enterprise receives employee services in exchange for either
equity instruments of the enterprise or liabilities that are
based on the fair value of the enterprises equity
instruments or that may be settled by the issuance of such
equity instruments. This statement eliminates the ability to
account for share-based compensation transactions using the
intrinsic value method as prescribed by Accounting Principles
Board, or APB, Opinion No. 25, Accounting for Stock
Issued to Employees, and requires that such transactions
be accounted for using a fair-value-based method and recognized
as expenses in our consolidated statement of operations. As of
the required effective date, the standard requires that the
modified prospective method be used, which requires that the
fair value of new awards granted from the beginning of the year
of adoption (plus unvested awards as of the effective date) be
expensed over the vesting period. In addition, the statement
encourages the use of the binomial approach to value
stock options, which differs from the Black-Scholes option
pricing model that we currently use in the footnotes to our
consolidated financial statements.

The revised FAS 123R as issued by FASB will
have a significant impact on our consolidated statement of
operations as we will be required to expense the fair value of
our stock option grants rather than expensing the intrinsic
value of stock options as is our current practice. FAS 123R
will be applicable to Satyam for annual periods beginning after
June 15, 2005 and currently we have not determined which
transition method we will use and have not estimated the likely
impact of FAS 123R. Given the uncertain effect of this new
accounting requirement, we have decided to cease all stock-based
compensation with effect from October 30, 2004, with
limited exceptions.

Critical Accounting Policies

The following is a brief discussion of the more
significant accounting policies and methods used by us. We have
identified the policies below as critical to our business
operations and the understanding of our results of operations.
The impact and any associated risks related to these policies on
our business operations is discussed throughout this section
where such policies affect our reported and expected financial
results. For a detailed discussion on the application of these
and other accounting policies, see Note 1 in the Notes to
the Consolidated Financial Statements included elsewhere in this
prospectus.

Our preparation of this prospectus requires us to
make estimates and assumptions that affect the reported amount
of assets and liabilities, disclosure of contingent assets and
liabilities at the date of our financial statements, and the
reported amounts of revenue and expenses during the reporting
period. Management bases its estimates and judgments on
historical experience and on various other factors that are
believed to be reasonable under the circumstances, the results
of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent
from other sources. There can be no assurance that actual
results will not differ from those estimates.

Management believes the following critical
accounting policies, among others, affect its more significant
judgments and estimates used in the preparation of its
consolidated financial statements.

Revenue recognition

Our revenue recognition policy is significant
because our revenue is a key component of our results of
operations. We follow very specific and detailed guidelines in
measuring revenue; however, certain judgments affect the
application of our revenue policy. Revenue results are difficult
to predict, and any shortfall in revenue or delay in recognizing
revenue could cause our operating results to vary significantly
from quarter to quarter and could result in future operating
losses.

We derive our revenues primarily from IT
services, which includes application development and maintenance
services, consulting and enterprise business solutions, extended
engineering solutions, and infrastructure management services.

Revenues earned from services performed on a
time-and-material basis are recognized as the
services are performed. IT services performed on time bound
fixed-price engagements require accurate estimation of the costs
which include salaries and related expenses of technical
associates, related communication expenses, travel costs, scope
and duration of each engagement. Revenue and the related costs
for these projects are recognized on percentage of completion,
with revisions to estimates reflected in the period in which
changes become known. Provisions for estimated losses on such
engagements are made during the period in which a loss becomes
probable and can be reasonably estimated. We recognize revenue
based on the completed-contract method where the work to
complete cannot be reasonably estimated.

We provide our customers with one to three months
warranty as post-sale support for our fixed-price engagements.
Historically, we have not incurred any material expenditure on
account of warranties and since the customer is required to
formally sign off on the work performed, any subsequent work is
usually covered by an additional contract.

Impairment of Goodwill

We assess the impairment of identifiable
intangibles, long-lived assets and related goodwill and
enterprise level goodwill whenever events or changes in
circumstances indicate that the carrying value may not be
recoverable. Factors we consider important which could trigger
an impairment review include the following:

significant changes in the manner of our use of
the acquired assets or the strategy for our overall business;



significant negative industry or economic trends;



significant decline in our stock price for a
sustained period; and



our market capitalization relative to net book
value.

When we determine that the carrying value of
intangibles, long-lived assets and related goodwill and
enterprise level goodwill may not be recoverable based upon the
existence of one or more of the above indicators of impairment,
we measure any impairment based on a projected discounted cash
flow method using a discount rate determined by our management
to be commensurate with the risk inherent in our current
business model.

Effective April 1, 2002, we adopted
SFAS 142 which requires, among other things, the
discontinuance of amortization related to goodwill and
indefinite lived intangible assets. These assets will then be
subject to an impairment test at least annually. We are required
to perform goodwill impairment tests on an annual basis and
between annual tests in certain circumstances. We performed an
initial impairment

review of goodwill on the adoption of
SFAS 142 and also carried out an annual impairment review
in 2005. Based on these tests there is no impairment of goodwill
during the year ended March 31, 2005.

Future events could cause us to conclude that
impairment indicators exist and that goodwill associated with
our acquired businesses is impaired. Any resulting impairment
loss could have a material adverse impact on our financial
condition and results of operations.

Accounts Receivable

We estimate the amount of uncollectible
receivables each period and establish an allowance for
uncollectible amounts. The amount of the allowance is based on
the age of unpaid amounts, information about the
creditworthiness of customers, and other relevant information.
Estimates of uncollectible amounts are revised each period, and
changes are recorded in the period they become known. A
significant change in the level of uncollectible amounts would
have a significant effect on our results of operations.

Accounting for income taxes

As part of the process of preparing our
consolidated financial statements we are required to estimate
our income taxes in each of the jurisdictions in which we
operate. This process involves us estimating our actual current
tax exposure together with assessing temporary differences
resulting from differing treatment of items for tax and
accounting purposes. These differences result in deferred tax
assets and liabilities, which are included within our
consolidated balance sheet. We must then assess the likelihood
that our deferred tax assets will be recovered from future
taxable income and to the extent we believe that recovery is not
likely, we must establish a valuation allowance. To the extent
we establish a valuation allowance or increase this allowance in
a period, we must include an expense within the tax provision in
the statement of operations.

Significant management judgment is required in
determining our provision for income taxes, our deferred tax
assets and liabilities and any valuation allowance recorded
against our net deferred tax assets. The valuation allowance is
based on our estimates of taxable income by jurisdiction in
which we operate and the period over which our deferred tax
assets will be recoverable. In the event that actual results
differ from these estimates or we adjust these estimates in
future periods we may need to establish an additional valuation
allowance which could materially impact our financial position
and results of operations.

Impact of Recently Issued Accounting
Pronouncements

Share-Based Payments

On December 16, 2004, the FASB issued
FAS 123R, Share-Based Payment, an amendment of FASB
Statements No. 123 and 95, that addressed the accounting
for share-based payment transactions in which an enterprise
receives employee services in exchange for either equity
instruments of the enterprise or liabilities that are based on
the fair value of the enterprises equity instruments or
that may be settled by the issuance of such equity instruments.
This statement eliminates the ability to account for share-based
compensation transactions using the intrinsic value method as
prescribed by Accounting Principles Board, or APB, Opinion
No. 25, Accounting for Stock Issued to Employees,
and require that such transactions be accounted for using a
fair-value-based method and recognized as expenses in our
consolidated statement of operations. As of the required
effective date, the standard requires that the modified
prospective method be used, which requires that the fair value
of new awards granted from the beginning of the year of adoption
(plus unvested awards at the date of adoption) be expensed over
the vesting period. In addition, the statement encourages the
use of the binomial approach to value stock options,
which differs from the Black-Scholes option pricing model that
we currently use in the footnotes to our consolidated financial
statements.

The revised FAS 123R as issued by FASB will
have a significant impact on our consolidated statement of
operations as Satyam, our subsidiaries and our associated
companies will be required to expense the fair value of our
stock option grants rather than expensing the intrinsic value of
stock options

as is our current practice. FAS 123R will be
applicable to Satyam for annual periods beginning after
June 15, 2005 and currently we have not determined which
transition method we will use and have not estimated the likely
impact of FAS 123R.

Risk Management Policy

Our functional currency is the Indian rupee,
however we transact a major portion of our business in
U.S. dollars and other currencies and accordingly face
foreign currency exposure from our sales in the United States
and elsewhere and from our purchases from overseas suppliers in
U.S. dollars and other currencies. Accordingly, we are
exposed to substantial risk on account of adverse currency
movements in global foreign exchange markets. The exchange rate
between the rupee and the U.S. dollar has changed
substantially in recent years and may fluctuate substantially in
the future.

We manage risk on account of foreign currency
fluctuations through treasury operations. Our risk management
strategy is to identify risks we are exposed to, evaluate and
measure those risks, decide on managing those risks, regular
monitoring and reporting to management. The objective of our
risk management policy is to minimize risk arising from adverse
currency movements by managing the uncertainty and volatility of
foreign exchange fluctuations by hedging the risk to achieve
greater predictability and stability. Our risk management
policies are approved by senior management and include
implementing hedging strategies for foreign currency exposures,
specification of transaction limits; specifying authority and
responsibility of the personnel involved in executing,
monitoring and controlling such transactions.

We purchase forward and options foreign exchange
contracts to mitigate the risk of changes in foreign exchange
rates on cash flows denominated in U.S. dollars. We enter
into foreign exchange forward and option contracts where the
counter party is generally a bank. We consider the risks of
non-performance by the counterparty as non-material. These
contracts mature between one and nine months. These contracts do
not qualify for hedge accounting under SFAS No. 133,
Accounting for Derivative Instruments and Hedging Activities,
as amended. Any derivative that is either not a designated
hedge, or is so designated but is ineffective per
SFAS No. 133, is marked to market and recognized in
earnings.

The table below provides information about our
financial instruments that are sensitive to changes in interest
rates and foreign currencies as of the dates shown. Weighted
average variable rates were based on average interest rates
applicable to the loans. The information is presented in
U.S. dollars, which is our reporting currency, based on the
applicable exchange rates as of the relevant period end. Actual
cash flows are denominated in various currencies, including
U.S. dollars and Indian rupees.

As at March 31,

2005

2004

2003

Total recorded

Total recorded

Total recorded

Amount

Fair value

Amount

Fair value

Amount

Fair value

(dollars in thousands)

Debt:

Variable rate short-term debt

$

1,685

$

1,685









Average interest rate

3.61%





Fixed rate long-term debt

$

4,288

$

4,292

$

4,182

$

4,189

$

4,074

$

4,081

Average interest rate

9.49%

10.93%

11.88%

Limitations:
Fair value estimates are made at a
specific point in time and are based on relevant market
information about the financial instrument. These estimates are
subjective in nature and involve uncertainties and matters of
significant judgment and therefore cannot be determined with
precision. Changes in assumptions could significantly affect the
estimates.

We also face market risk relating to foreign
exchange rate fluctuations, principally relating to the
fluctuation of U.S. dollar to Indian rupee exchange rate.
Our foreign exchange risk principally arises from accounts
payable to overseas vendors. This risk is partially mitigated as
we have receipts in foreign currency from overseas customers and
hold balances in foreign currency with overseas banks.

During fiscal 2005 and 2004, 96.6% and 97.2 %,
respectively, of our revenues were generated outside of India.
Using sensitivity analysis, a hypothetical 10% increase in the
value of the Indian rupee against all other currencies would
decrease revenue by 1.8 %, or $14.5 million, in fiscal 2005
and 1.6 %, or $8.8 million, in fiscal 2004 while a
hypothetical 10% decrease in the value of the Indian rupee
against all other currencies would increase revenue by 1.8% or
$14.5 million in fiscal 2005 and 1.6 % or $8.8 million
in fiscal 2004.

We had outstanding forward and options contracts
amounting to $301.5 million and $44.5 million as at
March 31, 2005 and 2004, respectively. Gains/(losses) on
outstanding forward and options contracts amounted to
$1.1 million and $435 thousand during fiscal 2005 and 2004
respectively. Using sensitivity analysis, a hypothetical 1%
increase in the value of the Indian rupee against all other
currencies would decrease these gains by $1.6 million in
fiscal 2005 and $450 thousand in fiscal 2004 while a
hypothetical 1% decrease in the value of the Indian rupee
against all other currency would increase these gains by
$1.6 million in fiscal 2005 and $450 thousand in fiscal
2004.

In the opinion of management, a substantial
portion of this fluctuation would be offset by expenses incurred
in local currencies. As a result, the aggregate of the
hypothetical movement described above of the value of the Indian
rupee against all other currencies in either direction would
have impacted our earnings before interest and taxes by
$16.1 million in fiscal 2005 and $9.3 million in
fiscal 2004. This amount would be offset, in part, from the
impacts of local income taxes and local currency interest
expense. As of March 31, 2005, we had approximately
$95.7 million of non-Indian rupee denominated cash and cash
equivalents.

Off-Balance Sheet Arrangements

We currently do not engage in any off-balance
sheet arrangements.

Foreign Currency Transactions/
Translation

During the fiscal 2005, 2004 and 2003, 81.8%,
84.5% and 81.2%, respectively, of our total revenues were
generated in U.S. dollars. A significant amount of our
expenses were incurred in Indian rupees and the balance was
primarily incurred in U.S. dollars, European currencies and
Japanese yen. Our functional currency and the functional
currency for our subsidiaries located in India is the Indian
rupee; however, U.S. dollars and Sterling pounds are the
functional currencies of our foreign subsidiaries located in the
United States and the United Kingdom respectively. The
translation of such foreign currencies into U.S. dollars
(our reporting currency) is performed for balance sheet accounts
using current exchange rates in effect at the balance sheet date
and for revenue and expense accounts using monthly simple
average exchange rates prevailing during the reporting periods.
Adjustments resulting from the translation of functional
currency financial statements to reporting currency are
accumulated and reported as other comprehensive income, a
separate component of shareholders equity.

We expect that a majority of our revenues will
continue to be generated in U.S. dollars for the
foreseeable future and that a significant portion of our
expenses, including personnel costs as well as capital and
operating expenditures, will continue to be denominated in
Indian rupees. Consequently, our results of operations will be
affected to the extent the rupee appreciates/ depreciates
against the U.S. dollar.

The average exchange rate of rupee to
U.S. dollar in fiscal 2005 was Rs.44.85 against Rs.45.96 in
fiscal 2004. As at March 31, 2005, the rupee depreciated to
Rs.43.62 against Rs.43.40 in March 31, 2004. As at
March 31, 2004, the rupee appreciated to Rs.43.40 against
Rs.47.53 as at March 31, 2003. As a result, loss on foreign
exchange transactions was $4.6 million in fiscal 2005 as
compared to a loss of $8.9 million in fiscal 2004.

We are a global IT solutions provider, offering a
comprehensive range of IT services to our customers including,
application development and maintenance services, consulting and
enterprise business solutions, extended engineering solutions,
infrastructure management services. We also offer BPO services
through our majority-owned subsidiary company, Nipuna. Our
headquarters are located in Hyderabad, India.

We began providing IT services to businesses in
1988 and are currently the fourth largest Indian IT software and
services company, based on the amount of export revenues
generated during the fiscal year ended March 31, 2004. Our
revenues grew to $793.6 million in fiscal 2005 from
$414.5 million in fiscal 2002, representing a compound
annual growth rate of 24.2%. For the same period, our net income
grew from $42.4 million to $153.8 million. The number
of our employees, whom we refer to as associates, grew from
9,532 as of March 31, 2002 to 20,690 as of March 31,
2005.

We leverage our global delivery model to deliver
high quality, cost effective IT solutions to our customers
located around the world. Depending on the complexity of the
assignment and the specific needs of the customer, we deliver
our services through a combination of our technology centers
located in India, our overseas facilities in Australia, Canada,
China, Hungary, Japan, Malaysia, Singapore, United Arab
Emirates, United Kingdom and United States and from onsite
locations at our customers premises. In addition, we have
17 sales and marketing offices in Canada, Germany, Italy,
the Netherlands, Spain, Sweden, United Kingdom and United States
and 14 sales and marketing offices in the rest of the
world. In major markets such as the United States, we have
industry-focused sales operations while in other markets we have
appointed regional heads who oversee the sales activity for
their respective markets.

We provide services to customers from various
industries including manufacturing, banking and financial
services, insurance, telecommunications, infrastructure media
and entertainment and semiconductors or TIMES, healthcare,
retail and transportation. We believe we have the ability to
develop large, long-term customer relationships, by
demonstrating an understanding of our customers business
requirements through our industry expertise and by continually
providing high quality services in a cost effective manner. As
of March 31, 2005, we had 390 active customers, including
144 Fortune Global 500 or Fortune U.S. 500 companies
and 30 companies that generated more than $5 million in
annual revenues in fiscal 2005. 92.1% of our revenues for fiscal
2005 and 90.7% of our revenues for fiscal 2004 were from repeat
business given by our existing customers.

In June 2002, we established our majority-owned
BPO subsidiary, Nipuna, which offers back-office transaction
processing services, customer care services and product support
and technical help desk services in the areas of finance and
accounting, human resources, claims administration and document
management. Nipuna has recently added services such as research,
analytics and animation to its portfolio of service offerings.
As of March 31, 2005, Nipuna had 1,367 associates and 21
customers, of which 11 were Fortune Global 500 and Fortune
U.S. 500 companies.

Industry Overview

Global IT Services Overview

Global IT services spending is estimated to total
$400.0 billion in 2004, representing an increase of
approximately 4.6% over 2003, and is projected to grow at a
compound annual growth rate of 6.4% to reach $512.8 billion
by 2008, according to International Data Corporation.

Due to increasing complexity and size of
IT projects, rapidly changing technology and lack of
skilled resources, many organizations are evaluating outsourcing
of their IT services to external providers. Global IT
spending is dominated by key industry segments such as
government, banking and financial services, manufacturing,
retail and healthcare. According to International Data
Corporation, the banking, insurance and financial markets
IT services spending is estimated to total $100.0 billion
in 2004 and is expected to grow to $130.4 billion in 2008,
representing a compound annual growth rate of 6.9%. IT spending
in the

retail segment is estimated to total
$22.1 billion in 2004 and is expected to grow to
$27.8 billion in 2008, representing a compound annual
growth rate of 5.9%. In addition, IT services spending in the
discrete and process manufacturing segment is expected to grow
from $93.7 billion in 2004 to $117.2 billion in 2008
representing a compound annual growth rate of 5.8%.

We believe the growth of global IT services
spending is driven by the following factors and trends:



Increased importance of IT to
businesses. In todays
increasingly competitive business environment, companies have
become dependent on information technology not only to conduct
day-to-day operations, but also as a strategic tool to enable
them to re-engineer business processes, restructure
organizations and react quickly to competitive, regulatory and
technological changes. As information systems continually become
more complex with the use of multiple applications and rapidly
changing technologies, companies are increasingly turning to
external IT service providers to develop and implement new
technologies and integrate them with existing applications in
which they may have already made considerable investments.



Impact of the Internet and other new
technologies on business.
Businesses are increasingly using the Internet to interact with
new and existing customers and create new revenue opportunities.
Businesses conducted electronically over the Internet extend
beyond Internet-based applications to include packaged software
tools, such as customer and supply chain management software,
that need to be integrated with a companys enterprise
systems. These initiatives are often large and difficult to
manage in-house and need to keep pace with constantly evolving
business processes and technological innovations leading to
demand for IT services companies.



Managing and upgrading existing
systems. Managing and upgrading
existing systems has become critical given the importance of IT
and related systems to new business initiatives. Internal IT
departments often do not have the appropriate resources or
breadth of skills necessary to manage or upgrade existing
systems. As a result, companies are increasingly looking to
external service providers to design, integrate, implement and
maintain their applications based on new technologies.



Increasing trend towards offshore
outsourcing. The increasing
complexities and costs of IT services, together with an
increasing need for highly skilled technology professionals and
tightening IT budgets for companies, are driving demand for
professional IT services companies who are able to provide a
cost effective, high quality, comprehensive range of services.
The offshore delivery model is enabling companies to
increasingly outsource complex assignments and generate not only
cost savings in IT services but also greater efficiencies in
their business processes. In addition, companies are
increasingly using the utility computing or
pay for what you use, model for infrastructure,
data-warehousing and IT system usage, which is further fueling
growth in infrastructure, network outsourcing and network
management services.

Indian IT Services Industry
Overview

As organizations realize the cost effectiveness
of offshoring their outsourced services, they are increasingly
making offshoring a part of their business strategy.

India is considered to be the most favored
destination for offshore IT service delivery. The
NASSCOM-McKinsey Report of 2002 estimates that export revenue
generated from the software and service industry in India was
approximately $15.5 billion in 2004 and is expected to
reach $50.0 billion by 2008 representing a compound annual
growth rate of 34.0%. The key factors that are expected to
contribute to this growth are:



High quality delivery record.
Indian companies have developed
high quality delivery processes. A 2004 NASSCOM survey of
international quality standards of the top 275 Indian IT
services companies reported that 195 companies had acquired
International Standards Organization, or ISO, 9000 quality
certification. According to NASSCOM, during 2004, 74 Indian
companies received a level five assessment under SEI-CMM,
developed by the Carnegie Mellon University. Level five is

the highest level attainable under the SEI-CMM
standards, which assess an organizations quality
management system and systems engineering processes and
methodologies.



Large supply of English-speaking IT
professionals. We believe that
India ranks second only to the United States as the country with
the largest population of English-speaking IT professionals.
According to the NASSCOM Strategic Review 2004, educational
institutes in India produce approximately 290,000 engineering
students and 139,000 computer software engineers each year.
Given the shortage of technical labor in the United States and
other developed economies, the availability of technically
skilled personnel is proving to be a competitive advantage for
Indian IT service companies.



Significant cost advantage.
We believe that the cost of
employing IT professionals in India is significantly lower than
in developed countries such as the United States. The use of
high quality, low cost resources provides a significant
opportunity for companies to realize cost savings by offshoring
IT services to India.

Trends

The Indian IT services industry has been
witnessing changes in customer demands and we believe that
service providers who are best able to adapt to these changes
will succeed in the long run. Some key emerging industry trends
are described below:



Enhanced expectations.
Increasingly, companies are
expecting more value from their IT service providers than just
the traditional cost advantages derived by offshoring the
delivery of IT services. Companies increasingly prefer service
providers that can provide strategic advice related to designing
and increasing efficiencies of business processes and also
assist in implementing their recommendations. Also, service
providers with strong industry expertise are favored over those
who can only provide strong technical skills.



Large, multi-year, end-to-end contracts.
Companies are increasingly looking
for IT service providers that can provide end-to-end solutions
over a long period of time. In addition, companies, which have a
presence across various geographies, need IT support on a global
scale and often seek a single service provider that can offer a
comprehensive range of services on a long-term basis across the
world, and understand and integrate a wide spectrum of emerging
technologies with existing systems.



Relationships with customers key
senior management. As outsourcing
contracts increasingly gain strategic importance to businesses,
customers senior management teams have become more
involved in outsourcing contract negotiation and monitoring. As
a result, IT service providers need to ensure that their senior
account managers develop strong and lasting working
relationships with customers senior management.



Performance measurement.
Companies are increasingly
demanding transparency in performance measurement. IT service
providers with their own well developed benchmarks, frameworks
and models to measure performance or demonstrate potential
benefits are likely to have significant advantage over their
competitors who offer more generic IT services.

Our Competitive Strengths

We believe that we are strongly placed to
consolidate our market position as a leading IT service provider
due to our competitive strengths which include:

customers and diversify our revenue base. Our
services are built on a foundation of a rich understanding of
the industries in which our customers operate and the underlying
technologies that drive those industries. Our industry-focused
business units such as manufacturing, banking and financial
services, insurance, TIMES, healthcare, retail and
transportation, allow us to understand the strategic issues
facing our customers. At the Gartner Global Sourcing Summit
2004, we were adjudged the winner of the Risk Management
Award, a prestigious award that recognizes effectiveness
in managing risk and were also declared a joint winner of the
Solution Delivery Award which recognizes creativity
in enhancing customers business competitiveness. The
voting for these awards was done solely by the business
executives attending the summit. Our dedicated technology
competency centers, which we refer to as centers of
excellence, track trends in key technologies, which
facilitates creation of solutions based on these technologies.
Our centers of excellence work closely with the industry-focused
business units in areas such as business intelligence, data
warehousing, customer relationship management, product life
cycle management and supply chain management to ensure that our
services fulfill our customers business objectives and IT
requirements.



Flexible, highly evolved delivery model.
We provide our services through 20
centers located in Australia, Canada, China, Hungary, India,
Japan, Malaysia, Singapore, United Arab Emirates, United Kingdom
and United States and our onsite teams operating at our
customers premises. Over the past decade, we have made
substantial investments in our infrastructure, processes and
systems allowing us to evolve our global delivery model to
effectively integrate offshore, offsite, nearshore and onsite
services and perform a greater volume of work at our offshore
development centers. This delivery model seeks to provide
customers with seamless solutions in reduced timeframes,
enabling them to achieve operating efficiencies and realize
significant cost savings. It also enables us to deliver the most
appropriate mix of resources and services on a 24/7 basis.
Furthermore, our robust delivery model is flexible, so that it
can be adapted to respond to customer objectives relating to
critical issues such as scalability and security. We continue to
evolve our delivery model and believe that our customer-oriented
approach and ongoing refinements represent an important
competitive advantage.



Established leadership position in
consulting and enterprise business solutions.
Our consulting and enterprise
business solutions help customers optimize their operating
costs, enhance the efficiency of their business processes and
improve their overall competitiveness. These solutions span the
development, implementation, integration and maintenance of
various enterprise-wide applications. Our solutions are enhanced
by our strategic alliances with more than 60 leading technology
providers such as SAP and Oracle. Our highly evolved delivery
model, coupled with our industry expertise and center of
excellence-driven technology competencies, allows us to provide
customers with a value proposition in consulting and enterprise
solutions. Over the past few years, we have made strategic
investments to augment our capabilities in this area which is
reflected in the growing revenues from this business. During
fiscal 2005 and 2004, 34.3% and 31.8% respectively, of our
revenues, was generated from consulting and enterprise business
solutions.



Strong relationships with blue chip
customers. We have long-standing
relationships with large multinational corporations built on our
successful execution of prior engagements. We believe we have
significantly more Fortune Global 500 or Fortune U.S. 500
corporations as customers, relative to scale of revenue, as
compared to other leading Indian IT services companies. As of
March 31, 2005, 144 of our 390 customers were Fortune
Global 500 or Fortune U.S. 500 corporations. Our track
record of delivering comprehensive solutions based on
demonstrated industry and technology expertise has helped in
forging strong relationships with our major customers and
gaining increased business from them. We have a history of high
customer retention and derive a significant proportion of our
revenue from repeat business. During fiscal 2005 and fiscal
2004, 92.1% and 90.7% respectively, of our revenues, were
generated from existing customers.



Track record of high quality execution.
We are committed to achieving
operational excellence in our processes, people and
infrastructure. Our quality assurance programs form an integral
part of

our project management methodology and seek to
ensure that we consistently deliver high quality services to our
customers. For instance, we have a company-wide quality
management system, which satisfies the ISO 9001:2000 TickIT
standard. We have been certified as being compliant with level
five of the SEI-CMM standard, the highest level possible, and
have implemented the Six Sigma processes for application
development and maintenance. We have a large pool of highly
skilled, well-trained technical associates spanning
25 nationalities. As of March 31, 2005, we employed
18,001 technical associates in the IT services, of which 54.0%
had bachelors degrees in engineering and 24.0% had
masters degrees in engineering, technology or computer
applications. Each new technical associate participates in an
intensive 12 week initial training program and a minimum of
40 hours training each year on development and leadership.
We continue to develop our infrastructure to make it more
resilient. For instance, we have implemented the British
Standard 7799, or BS7799 standard, which delivers a high level
of information security to protect our customers
intellectual property. We have also established a comprehensive
disaster recovery and business continuity model to ensure
uninterrupted service availability from our global delivery
network. We constantly benchmark our processes, people and
infrastructure against globally recognized standards.



Culture of innovation.
We have a history of innovation
that is facilitated by our entrepreneurial culture and our
managements willingness to make strategic investments in
growth markets. We believe we were one of the pioneers in the
delivery of India-based IT services. For example, we believe
that we were among the earliest Indian IT service companies
to set up in 1992 a dedicated satellite link between a
customers facilities and our India operations. Our
technology laboratories continue to develop and bring to market
new solutions based on new technologies. For instance, we are
one of the few companies in India to offer utility and grid
computing services to customers. We have also been innovative in
our internal organization and have introduced industry leading
practices in hiring, resource planning and knowledge sharing.
These accomplishments and initiatives have further enhanced our
brand and reputation in the marketplace.

Our Growth Strategy

Our goal is to be a leading global provider of
comprehensive IT solutions and services. We intend to accomplish
our goal by:



Building on our long-standing customer
relationships to cross-sell our comprehensive range of
services. Our goal is to build
long-term sustainable business relationships with our customers
to generate consistent revenues. We plan to continue to expand
the scope and range of services provided to our existing
customers by continuing to build our expertise in major
industries and extending our capabilities into new and emerging
technologies. For example, we intend to capitalize on the BPO
services offered by Nipuna by cross-selling these services to
our existing customers, which will enable us to secure a higher
share of our customers spending. To further strengthen our
relationships and broaden the scope and range of services we
provide to existing customers, our senior corporate executives
have specific account management and relationship
responsibilities. We have successfully established strong
relationships with our customers chief information
officers and are continuing to strengthen our relationships with
other key members of our customers management teams. These
strong relationships have helped us to better understand our
customers business needs and enabled us to provide
effective solutions to meet these needs.



Continuing to focus on enterprise-wide
business solutions and high quality value-added services.
To better serve our customers in
key industry segments, we intend to continue to focus on
providing end-to-end enterprise-wide business solutions and
increasing our share of value-added services, such as data
warehousing and business intelligence, application portfolio
management, process and quality consulting, business performance
management, industry and regulatory specific solutions and grid
computing solutions. To continue to differentiate our services
and achieve recognition as a leading global provider of
comprehensive IT services, we intend to continually invest in
research and development and broaden our range of solution
offerings as new technologies become available.

Expanding our presence in existing markets
and penetrating new geographic
markets. We plan to expand our
presence in our existing markets and establish a presence in new
geographic markets throughout North America, Europe, Latin
America, and the Asia-Pacific region. We intend to accomplish
this by increasing our brand visibility and leveraging our
global development centers to extend our services to customers
located in these geographies. We also plan to continue to hire
local associates to staff and manage our global development
centers and to strengthen our sales and marketing functions to
facilitate building strong relationships. We believe that the
use of locally hired technical associates and managers working
from our global development centers will enable us to increase
our market share in the local markets and compete effectively by
combining local expertise with our global delivery capabilities.
We expect that a wider geographical presence will also
facilitate revenue generation in multiple currencies, reduce our
exposure to volatility in a particular currency, and help hedge
against margin erosion due to currency fluctuations.



Continuing to enhance our industry
expertise. We aim to have an
in-depth understanding of targeted industries including
manufacturing, banking and financial services, insurance, TIMES,
healthcare, retail and transportation, which will help us
identify and understand customer needs and proactively design
and offer customized IT solutions to address those needs. By
focusing on targeted industries, we believe we can develop
industry-specific solutions and services that can be leveraged
effectively to deliver services within the same industry,
thereby lowering our cost of delivering those services. We
intend to enhance our business knowledge and competencies in the
various industries that we service by hiring additional
specialists with deep industry knowledge and expertise.



Attracting and retaining quality technical
associates and augmenting their
training. To attract, retain and
motivate our technical associates, we plan to continue to
provide an environment that rewards entrepreneurial initiative
and performance, including competitive salaries and benefits as
well as performance-linked incentives. We also intend to
continue to devote significant resources to train our technical
associates in a variety of software languages and computer
platforms through our Satyam Learning Center.



Enhancing our capabilities through
technology alliances and
acquisitions. We intend to
continue to explore the formation of new alliances as well as
strengthen existing partnerships with key technology vendors to
enable us to leverage our partners strengths. We will also
consider acquisitions to gain access to specific technologies
and exploit synergies with our existing business. We regularly
engage in discussions and negotiations in the ordinary course of
our business relating to potential investment, technology
alliances and acquisitions that would achieve these objectives.
For example, we have recently announced a proposed strategic
acquisition of Citisoft plc (see Summary 
Recent Developments).

IT Service Offerings

We offer a comprehensive range of IT services
based on existing and emerging technologies that are tailored to
meet the specific needs of our customers. Our IT services
include:

Application development and maintenance
services

Application development

We design, develop and implement customized IT
solutions software for a variety of business processes and
requirements. Our solution implementations range from
single-platform, single-site systems to multi-platform,
multiple-site systems. A project may involve the development of
a new application, customizing packaged software, enhancing the
capabilities of existing software applications, upgrading a
legacy solution both to suit the newer technology environments
and to enhance the lifetime of such applications. Each
development project typically involves the full life-cycle of
software development, including, definition, prototyping,
architecting, designing, piloting, programming, testing,
installing and subsequent maintenance.

As an example, one of our customers, engaged in
the business of manufacturing earthmoving, mining and
construction machinery needed to integrate its dealer networks
in Europe and Africa with its head office in Switzerland.
Through a mix of onsite and offshore resources, we developed and
completed the deployment of an Internet based solution in a span
of 18 months that integrated the customers
centralized systems in Switzerland with its dealer network in
Poland. Our solution encompassed inventory management, order
fulfillment, automation of warehouse activities and purchasing
decisions. By virtue of our solution, our customer transitioned
to an online, automated system that is easily accessible to its
dealers and facilities real-time communication, better data
management, superior handling of dealer queries and greater
usability while delivering significant productivity gains. We
are currently assisting the client in rolling out this solution
in other countries in Europe and Africa.

Application maintenance

We provide maintenance services for large
software systems, including modifications and enhancements to
the business functionality as well as providing production
support to facilitate around the clock availability of
applications spread across multiple geographies encompassing
diverse technologies. We interact with the business users to map
new functionalities and enhance the application systems to cater
to new set of business rules. We also assist customers in
migration or re-hosting to new technologies, such as Microsoft
and Open systems, to extend the useful life of existing systems.
We perform most of the maintenance work at our offshore global
development centers using satellite links to our customers
systems. In addition, we maintain a small team on our
customers premises to coordinate support functions. In
certain instances, we utilize our offsite and nearshore
development centers to coordinate these support functions with
either no or minimal work at the customers site.

As an example, for one of our customers engaged
in the oil and gas industry, we are providing application
management services, which include supporting the
customers downstream refining and marketing applications
across Australia, Belgium, Dubai, France, Germany, India, the
Netherlands, New Zealand, United Kingdom and United States. The
customers portfolio of applications consists of over 2,000
applications in addition to JDE, Oracle applications, and SAP
interfaces, 1,500 databases and 150 servers on multiple
technology platforms ranging from mainframes to NET and J2EE
technologies. We designed and implemented an integrated global
support model for the customer across multiple geographies,
including the United States, United Kingdom, India and Australia
to provide uninterrupted support for the customers IT
applications and platforms. As part of this engagement, we also
took over the production support for one of the most complex and
critical business applications of our customer, its indigenously
developed Oracle based Enterprise Information System. We
provided these services through a combination of onsite and
offshore models.

Consulting and enterprise business
solutions

Leveraging our alliances with independent
software vendors such as Oracle, SAP and Informatica, we offer
an extensive portfolio of consulting and enterprise business
solutions to enhance our customers business
competitiveness. We provide solutions and services in the areas
of enterprise resource planning, customer relationship
management and supply chain management, data warehousing and
business intelligence, knowledge management, document management
and enterprise application integration to address the
customers needs and to integrate systems and processes
across the organization for optimized business performance.
These solutions enable our customers to strengthen relationships
with their customers and business partners, create new revenue
opportunities, enhance operating efficiencies and improve
communication.

As an example, one of our customers has been
awarded a contract to manage the construction and operations of
a major new Asian airport and transportation hub. We have been
selected as one of the members of a consortium of technology
providers and our role is to integrate the operational,
management and support systems at the new airport. We will be
developing interfaces to integrate various systems such as
ABBs Airport Operational Systems, Siemens SAP-based
Airport Management Database System and 32 other disparate
sub-systems including air traffic control, visual guidance and
docking, flight information

display, gate management, building maintenance,
airline host computer, aviation fuel and customs and immigration
covering nearly 300 interfaces. Our solution is expected to
provide the backbone essential for the smooth and efficient
operation of the airport which is expected to service peak
traffic of 100 million passengers per annum and handle
approximately 800 flights a day.

Extended engineering
solutions

We provide extended engineering solutions to
industries such as the automotive, aerospace, industrial
equipment, consumer appliances and telecommunications, using
computer aided design, modeling and engineering tools. Our
services include mechanical designing, embedded and electronic
designing, product and process analysis, product life-cycle
management and range from handling basic drawing changes to
delivering complex designs. Our focus is to enable our customers
to realize significant cost benefits and to enable them to
compete effectively in their product design and development
functions.

Since October 2003, we have provided engineering
solutions for a leading semiconductor equipment manufacturer. As
part of this engagement, we provide integrated engineering
services that span mechanical, electrical and control systems
engineering. We have filed joint patents with our customer for
one of the component designs. Our experience of concurrent
engineering, innovative designs and manufacturing processes
coupled with iSTRIVE (in-house developed six sigma methodology)
has helped reduce the time to release new drawings by nearly
40%, thereby reducing the time to market, a critical success
factor in the semiconductor industry.

Infrastructure management
services

To address our customers specific requests
to provide infrastructure and technology support, we provide
solutions and services which range from routine maintenance of
hardware and software to complex security solutions. Our
services include administration, infrastructure management,
migration, upgrades, configuration, backup, security management,
performance management, operations monitoring and consolidation
services for a variety of operating systems and platforms, data,
voice and video networks and mail servers. We offer services
which cover a range of hardware platforms (IBM, HP and Sun) and
environments (UNIX, AIX, Solaris, HP-UX and Windows). We have
also built alliances with over seven infrastructure and
technology product vendors to enhance our capabilities. We
leverage our data center facility in Columbus, Ohio, in the
United States to provide various hosting services to our
customers.

As an example, for a financial services customer
in the United States, we perform database administration and
middleware management service across the United States, United
Kingdom, Japan and Hong Kong. We manage diverse databases and
technology platforms such as Oracle, DB2, Sybase, SQL Server,
Websphere, and MQ Integrator. We also manage the level 1
and level 2 administration and support services for the
user community and monitor the database server health, track and
fix user problems, provide reporting services and manage
upgrades for the different hardware and software systems.

Delivery of IT Services

We leverage our integrated global delivery model,
which we refer to as the RightSourcing Model, to
provide flexible service delivery alternatives to our customers
through our offshore centers located in India, offsite centers
established in our major markets, nearshore centers located
geographically near our customers premises and through our
onsite teams operating at our customers premises. Our
offshore, offsite and nearshore centers are linked to our
customers onsite system through a high performance
communication network, enabling us to provide integrated
services from each delivery location. Our global delivery model
allows us the flexibility to transition onsite IT services
seamlessly to our offsite, nearshore or offshore centers, which
benefits our customers and provides us with greater returns.

Offshore centers

We typically assign a team of technical
associates to visit a customers premises to determine the
scope and requirements of a particular project. Some members of
the initial team remain onsite to

facilitate direct liaison with the customer,
while others return to India to establish and supervise a larger
project team of suitably qualified technical associates to
implement the project. Typically, approximately 20% of a project
team is onsite but the ratio can vary based on the nature and
complexity of the project.

We have also entered into arrangements with
several customers where an entire project team is assigned to a
single customer. Such teams, called dedicated offshore centers,
work from our facilities in India and are staffed and managed by
us. Once the project priorities are established by the customer,
we, in conjunction with the customers IT department,
manage the execution of the project. When needed, such offshore
centers have equipment specific to the customer, or have a
designated work area with its own security protocols. In such
cases, the customer agrees to regular periodic billing
regardless of the work performed.

Offsite centers

We believe that a key success factor in meeting
our customers needs is our physical proximity to the
customer. Accordingly, we have expanded and improved our
offshore development model by establishing offsite centers in
our major markets. We have 15 offsite centers in locations in
Australia, Canada, China, Hungary, Japan, Malaysia, Singapore,
United Arab Emirates, United Kingdom and United States. In
addition, many of our existing customers are expanding into new
geographic markets and are requiring us to serve them in these
new locations. This trend has led us to increase the number of
offsite centers as a part of our Follow the Customer
strategy. We believe that these offsite centers, apart from
serving our existing customers, also help us generate new
business in these geographic locations. We believe our offsite
centers allow us to respond quickly to customer requests, to
interact closely with the customer to develop IT services where
the customers specifications are not clearly defined and
to market services tailored to meet the needs of specific
geographic markets. We staff our offsite centers with
locally-hired managers, marketers and technical associates which
we believe enables us to compete more effectively with local IT
service providers.

Nearshore centers

For some of our customers, especially in the
United States, we have leveraged Canada as a nearshore center
because of its proximity to the customer and the advantages of
providing services from centers in the same time zone as the
customer. Instead of using only our offshore and onsite
locations for the solution delivery, we utilize these nearshore
centers to perform a variety of life cycle activities. For
example, for certain development projects, we have created
prototypes of the solution in these nearshore centers. Since the
development of prototypes typically involve a high level of
interaction with the customer and our onsite teams, the
nearshore centers facilitate quick turnaround times.

We use our China development center as a
nearshore center for the Asia-Pacific region to leverage the
language capability and also multi-byte data for Asian
languages. Similarly, we intend to use our Hungary development
center for the European and North and South American markets.

Onsite teams

Some customers require the presence of our
project teams at their premises, particularly for mission
critical or higher involvement projects. The customers
team and our project team collaborate to develop IT services
that meet the customers specifications.

Quality and Project Management

Critical elements for the success of our global
delivery model are well established quality management systems
and sophisticated project management techniques. As an integral
part of our processes, we have established a strict quality
assurance and control program. We are certified under the ISO
9001 TickIT standard. In March 1999 our IT engineering process
received a level five assessment, which is the highest level of
the CMM assessment, under the Capability Maturity Model
developed by the Carnegie Mellon Software Engineering Institute.
Recently, we adopted Six Sigma as a way of improving our
processes and

providing the highest levels of quality to our
customers. Our quality management system involves, among other
things, a rigorous review of software development processes,
review and testing of work product and regular internal quality
audits.

We have also been certified under
BS7799  information security management model. This
model governs our information security activities and helps us
manage security, business continuity and disaster recovery
requirements of our customers. Maintaining a high level of
customer satisfaction requires sophisticated project management
techniques to deliver services seamlessly across multiple
locations and time zones. We have developed and applied a
sophisticated global project management methodology to help
ensure timely, consistent and accurate delivery of our IT
services to our customers. Through this methodology, we provide
our customers with customized status reports which allow them to
track the status of projects over the Internet.

Customers

We market our services primarily to companies in
the North America, Europe, the Middle East and the Asia-Pacific
region. We have a global customer base which, as of
March 31, 2005, consisted of 390 customers including
144 Fortune Global 500 and Fortune U.S. 500 companies.

While we derive a significant proportion of our
revenues from a limited number of customers, our strategy is to
seek new customers and at the same time secure additional
engagements from existing customers by providing high quality
services and cross-selling new services. The strength of our
relationships has resulted in significant recurring revenue from
existing customers. Our business from existing customers in
fiscal 2005, 2004 and 2003 accounted for 92.1%, 90.7% and 90.5%
of IT services revenues, respectively. In fiscal 2005, 2004 and
2003, our largest customer, together with its affiliates,
accounted for 10.8%, 14.3% and 16.1%, respectively, of our total
revenues. In fiscal 2005, 2004 and 2003, our second largest
customer accounted for 7.4%, 9.9% and 8.7%, respectively, of our
total revenues. Our top five customers accounted for 29.2% and
36.5% of our total revenues in fiscal 2005 and 2004,
respectively.

The following is a distribution of our customers
by our revenues on a trailing 12-month basis or for the fiscal
periods indicated:

Fiscal

2005

2004

2003

No. of $1+ million customers

109

81

58

No. of $5+ million customers

30

24

19

No. of $10+ million customers

19

9

9

Our customers are from diverse industry segments,
including from the manufacturing, banking and finance,
insurance, and telecom segments. The manufacturing segment
accounts for the highest contribution of our revenues followed
by the banking and finance segment. We continue to witness
accelerated growth in the healthcare segment, while customers
have been increasing in newer segments such as retail, energy
and utilities.

The following is a distribution of our
IT revenues across our industry segments for the three most
recent fiscal years:

Fiscal

2005

2004

2003

Manufacturing

29.2

%

32.0

%

33.0

%

Banking and Finance

17.8

18.3

21.3

Insurance

11.4

13.7

14.0

TIMES

17.3

13.5

10.6

Healthcare

6.0

6.0

3.2

Retail

2.8

1.9

0.6

Transportation

2.7

2.1

1.4

Others

12.8

12.5

15.9

Total

100.0

%

100.0

%

100.0

%

Sales and Marketing

We market our services mainly through 17 sales
and marketing offices which are located in Atlanta, Chicago,
Hartford, Parsippany, Santa Clara and Vienna in the United
States, as well as in Canada, Germany, Italy, the Netherlands,
Spain, Sweden and United Kingdom. We also have 14 sales and
marketing offices located in Australia, Singapore, United Arab
Emirates, Korea, Taiwan, Japan and India.

Our sales and marketing operations are divided
into three sub-groups. One group consists of sales associates
who work solely on acquiring new customers. The second group
consists of relationship managers who cross-sell services to
existing customers and are responsible for building long-term
relationships with such customers. The third group supports the
business development efforts of the other two groups. In markets
such as the United States, we have an industry-focused sales
operation, while in other markets we have regional heads who
oversee the sales activity. As of March 31, 2005, we
employed 197 marketing and sales associates.

In order to create greater visibility and
recognition of our Satyam brand, we have introduced a focused
program to enhance communication with customers in our target
industries and enable sharing of experiences and industry
developments with our customers. This program includes holding
annual customer summits to facilitate customer interaction,
organizing forums where industry leaders participate virtually
from multiple locations across the globe to discuss trends and
related issues, and participating in and sponsoring industry
events.

Nipuna was established in fiscal 2002. To promote
Nipunas business, we entered into an agreement with two
investors, Olympus BPO Holdings Limited and Intel Capital
Corporation Services Limited, which restricts Satyam from
engaging in activities that are or could directly or indirectly
be competitive with the business of Nipuna. Such activities
include among others providing BPO, soliciting existing or
prospective customers of Nipuna to obtain the services offered
by Nipuna from other service providers and investing in
companies engaged in the same or similar business as Nipuna.
These non-compete restrictions apply until the investors redeem
all of their preference shares in Nipuna or their equity
interest in Nipuna falls below 5% after an initial public
offering. See Risk Factors  Risks Related to
Our Overall

Operations  We face intense
competition in the IT services and BPO markets which could
prevent us from attracting and retaining our customers and could
reduce our revenues.

As of March 31, 2005, Nipuna had
21 customers including 11 Fortune Global 500 and
Fortune U.S. 500 companies. For fiscal 2005 and fiscal
2004, Nipuna had revenues of $10.0 million and
$2.4 million, respectively. Nipuna handles more than 50
business processes for its customers, a majority of which are
also customers of Satyam. A majority of Nipunas customers
are Fortune Global 500 and Fortune
U.S. 500 companies, who have offshored their critical
business processes to Nipuna. Some of Nipunas arrangements
with its customers have Service Level Agreements, or SLAs,
as defined, which if Nipuna were to fail to meet, would result
in loss of revenue.

The services offered by Nipuna include:

Claims administration and transaction
processing services

Nipuna offers transaction processing services
such as data management and claims administration to its
customers. For example, Nipuna provides dental and medical
claims administration support by facilitating data entry of the
claims received, for one of the largest insurance companies in
the United States. Its services have resulted in significant
costs savings for the customer besides providing the customer
with increased flexibility to manage workload during the peak
and off-peak periods.

Customer care services

Nipuna provides customer care services to
customers in different industries. For example, it provides
inbound and outbound support for dial-up and digital subscriber
line or DSL customers of a Fortune 100 communications services
company.

Nipuna also provides IT help desk support to its
customers.

Engineering services

Nipuna handles assembly plant management for one
of the worlds largest engine manufacturers. It also
manages other processes such as quality compliance and
management, engineering change management, AIS documentation,
new product introduction and warranty claims processing. Nipuna
also manages data entry of contact information for potential
customers into a single database for one of the worlds
largest automobile manufacturers.

Strategic Alliances

We have in the past entered into, and plan to
continue to enter into, strategic alliances with leading
technology vendors and system integrators to deliver IT
solutions across a wide array of technologies and platforms. We
have partnered with some of the leading names in key application
areas such as ERP (SAP & Oracle), CRM, Integration
Middleware, Business Intelligence (Business Objects and
Informatica) and Collaborative Commerce. Some of our other
prominent alliance partners include 4S, Matrix One, Documentum,
Hummingbird and Hyperion. We believe that our existing alliances
with over 60 leading technology vendors spanning distinct parts
of our customers value chain have enhanced our ability to
offer packaged solutions across a wide array of technologies and
platforms to our customers. We work closely with our alliance
partners who provide assistance in technology evaluation and
selection, product support and product enhancements. None of
these alliances are exclusive in nature and some of the alliance
agreements need to be renewed each year.

We refer to our employees as
associates. Our success depends in large part on our
ability to attract, develop, motivate and retain highly skilled
technical associates. Besides competitive salaries and incentive
pay, we also offer extensive training, an entrepreneurial work
environment and opportunities to work overseas. Since May 1998,
we have offered stock options to our associates but, subject to
certain exceptions, have decided to stop all stock based
compensation with effect from October 1, 2004. As of
March 31, 2005, we had 20,690 associates including
Nipunas 1,367 associates representing a compound
annual growth rate in the number of our associates of 32.5%
since fiscal 2000. None of our associates are represented by a
union. We believe that our relationship with our associates is
good.

Our growth has been driven by our ability to
attract top quality talent and effectively engage them. We
strongly believe in caring for our associates welfare and
were selected as one of the Top 10 Best Employers in India by
BT-TNS-Mercer & CNBC-Hewitt in 2004.

Recruiting

We recruit graduates from the engineering
departments of Indias leading universities, engineering
and technical colleges and management institutes. India has over
1,500 such institutions and, with the rapid growth of the IT
services industry in India, the number of students pursuing
education in software engineering has increased in recent years.
This has allowed us to recruit from a large pool of qualified
applicants who undergo our rigorous selection process involving
a series of tests and interviews. We also hire professionals who
have relevant prior experience from working in India and outside
India.

Learning and Developmental
Training

We devote significant resources for training our
associates. We established the Satyam Learning Center, which
promotes our culture of learning and serves as a catalyst for us
to sustain our technological and managerial edge. We require our
technical associates to undergo a minimum of 40 hours of
learning per year. We have qualified full-time faculty at our
learning center that provides ongoing training to our associates
at all levels, through which we build competencies in emerging
disciplines necessary to meet our customers needs. Our
training initiatives provide us with a pool of qualified
associates which in turn provides us the flexibility to ramp up
resources to meet the demands of particular projects and to
redeploy our personnel across projects according to our business
needs. Apart from technical oriented learning, we also provide
leadership training, language training and training on cultural
sensitization. Trainers for our leadership training include
professors from the Harvard Business School. Our leadership
training is aimed at broadening our leadership bandwidth and
developing our associates into business leaders for critical
business areas such as program management and relationship
management.

We also recruit managers in non-software
engineering fields for positions as project leaders and project
managers and provide them with extensive training, usually over
a six-month period, in software engineering and project
management skills.

Retention

To attract, retain and motivate our associates,
we seek to provide an environment that rewards entrepreneurial
initiative and performance. We also provide competitive salaries
and benefits as well as incentives in the form of cash bonuses.
In fiscal 2005, 2004 and 2003, we experienced associate
attrition in IT services at a rate of 16.5%, 17.5% and 15.6%,
respectively, which included involuntary attrition ranging from
3% to 5% as part of our systematic quality campaign.

Our human resources policies and practices are
oriented towards enhancing associate engagement levels by
proactively addressing the factors that impact retention.
Several learning and development opportunities are provided to
ensure that associates not only upgrade their skills and
competencies but are also able to keep pace with cutting edge
technologies and prepare themselves to take up challenging
roles. Through our comprehensive rewards and recognitions
programs and opportunities for job rotation across

technologies, industries and locations, we ensure
that our associates are motivated and performance oriented.
During the last 12 months, our retention rate at senior
leadership levels, (which comprises 20% of our workforce), has
been 95% and the retention rate for top performers (who comprise
approximately 40% of our total associates) is approximately 90%.

Our professionals who work onsite at
customers premises in the United States on temporary and
extended assignments are typically required to obtain visas.
H-1B visas are generally used for deploying personnel to the
United States for onsite work, and L-1 visas are typically used
for intra-company transfers of employees. Although there is no
limit to new L-1 petitions, there is a limit to the number of
new H-1B petitions that the United States Immigration and
Naturalization Service may approve in any government fiscal year
and in recent years this limit has been reached well before the
end of the fiscal year. We are generally able to obtain H-1B and
L-1 visas within two to four months of applying for such visas,
which remain valid for three years and can be extended for a
further three years. We plan for our visa requirements by
forecasting our annual needs for such visas in advance and
applying for such visas as soon as practicable. Our internal
processes enable us to anticipate the amount and type of visas
we need for our associates and to plan our resources in advance
to meet our project needs.

Competition

We operate in a highly competitive and rapidly
changing market and compete primarily with:



consulting firms such as Accenture, BearingPoint,
Capgemini and Deloitte Consulting;



divisions of large multinational technology firms
such as Hewlett-Packard and IBM;



IT outsourcing firms such as Computer Sciences
Corporation, Electronic Data Systems and IBM Global
Services; and

We also compete with software firms such as
Oracle and SAP, service groups of computer equipment companies,
in-house IT departments of large corporations and programming
companies and temporary staffing firms. In addition, Nipuna
faces competition from firms like Progeon and Wipro BPO,
formerly known as Wipro Spectramind.

In the future, we expect competition from firms
establishing and building their offshore presence and firms in
countries with lower personnel costs than those prevailing in
India. However, we recognize that price advantage alone cannot
be a sustainable competitive advantage. We believe that the
principal competitive factors in our business include our range
of services offered, our level of technical expertise and
industry knowledge, our responsiveness to customers
business needs and the perceived value added. We believe we
compete favorably with respect to these factors.

Communications Infrastructure

A key component of our IT services delivery model
is our ability to connect the customers system with our
offsite and offshore centers through a robust and high
performance communications network. Our data and voice network,
SatyamNet, connects our facilities worldwide through a high
speed network with a backbone of satellite, fiber optic and land
lines. SatyamNet provides flexibility for the projects to
operate from any of the development facilities inside Satyam
providing for seamless integration.

We have dedicated telecommunication leased lines
from reputed service providers such as AT&T, Sprint, MCI,
Telstra, VSNL, Bharti and Software Technology Park of India
which permit data communication between our facilities in India
and our customers facilities abroad. In the United States,
we have communication hubs in Vienna, Virginia and Parsippany,
New Jersey to connect to our customers sites.

We monitor the network performance and
continually upgrade SatyamNet to enhance and optimize network
efficiency across all operating locations. We currently have
20Mbps International Private Leased Circuits (IPLC) and
30Mbps Internet bandwidth in India. In addition, we have 12Mbps
high speed links connecting various cities in India, with our
intra-city links being connected by multiple 2 Mbps lines
totaling to 130Mbps across the country. We upgrade the bandwidth
based on our requirements.

Our network has surplus capacity available to
service new customers in the immediate future and to permit
sudden bursts of data transfer and other contingent uses. We use
voice over Internet protocols (VoIP) for our voice
communication. We have created a resilient network through
redundancy in the network and keep adequate stock of spares to
ensure high availability and reliability of our networks.

SatyamNet has extensive security and virus
protection capability built to conform to stringent customer and
international standards to protect Satyam from virus attacks and
provide the necessary security to customers data. We have
created plans for business continuity and disaster recovery by
defining multiple sites across India and other development
centers as backup centers for continuity of work.

Facilities

Our corporate headquarters, the Satyam Technology
Center, is located in Hyderabad, India. We own this facility,
which provides a modern workspace for approximately 1,400
software associates in two buildings covering an aggregate area
of approximately 173,000 square feet, which are linked to
our other facilities through SatyamNet. The Satyam Technology
Center also has recreational facilities and housing for up to
500 associates which covers an area of approximately
140,000 square feet.

We also have additional offshore software
technology centers located in Bangalore, Bhubaneshwar, Chennai,
Hyderabad and Pune in India with facilities aggregating
approximately 570,000 square feet. We own some of the
facilities while others are leased by us on a long-term basis
ranging from six to nine years.

Each facility is equipped with computers,
servers, telecommunications lines and back-up electricity
generation facilities sufficient to ensure an uninterrupted
power supply.

In addition to the offshore centers in India, we
operate offsite and nearshore centers in major markets to
establish a local presence closer to our customers. We lease all
of our offsite and nearshore centers for durations ranging from
two years to seven years.

The delivery centers of Nipuna are located in
Hyderabad and Bangalore and cover an area of 75,000 square
feet and 52,000 square feet respectively.

Research and Development

Our research and development efforts are focused
on developing services required by our existing customers, to
attract new customers and developing competencies and leadership
in our service offerings. We have established close alliances
with U.S. and Indian institutions such as Carnegie Mellon
University and Indian Institute of Technology, Madras to
strengthen our technology competencies. We have set up an
enterprise business solution laboratory where latest versions of
products are evaluated, business solution scenarios are created
and validated. We have set up a grid computing laboratory which
simulates a live grid environment for testing sample
applications on the grid. We have also established a
datawarehousing and business intelligence center which has
developed proprietary business intelligence architectural
platform which enables us to build large scale data warehousing
and business intelligence solutions. We are also working with
major technology providers in the areas of technology
architectures for .NET for solutions for various industries. In
the embedded systems space, we have created an environment to
simulate various operating conditions and validate the solutions
we build. We have an applied research group which focuses on
creating IP in the areas of competition, communication,
networking and information processing algorithms. In addition to
presenting papers at international conferences and publishing in
referenced journals, this group has over 16 United States patent
applications in various stages of registration. In fiscal 2005
and 2004, we spent 0.08% and 0.11% of our total revenues on
R&D activities.

B. Ramalinga Raju
has been on our board of directors
since our inception in 1987. Prior to becoming the Chairman in
1995, he was the Vice Chairman of the Satyam Corporate Group.
Mr. Ramalinga Raju also sits on the board of directors of
Nipuna. Mr. Raju founded Satyam Computer Services in 1987
and has been instrumental in developing Satyam into one of the
top Indian IT services company. Among the many awards received
by him, Mr. Raju was awarded the Corporate Citizen of
the Year award during the Asian Business Leadership Summit
held in Hong Kong in 2002. He was also named as the IT Man
of the Year by Dataquest in 2001 and was conferred the
Entrepreneur of the Year Award (Services) by
Ernst & Young, India in 2000. Mr. Ramalinga Raju
holds a Master of Business Administration degree from Ohio
University and has attended the Advanced Management Program
conducted by Harvard Business School.

B. Rama Raju
has been on our board of directors
since our inception in 1987. He became the Managing Director and
Chief Executive Officer in 1991. Prior to joining our company,
he was a director of Maytas Infra Limited. Mr. Rama Raju
also sits on the board of directors of Nipuna, Maytas Infra
Limited and Satyam Venture Engineering Services Private Limited.
Mr. Rama Raju holds a Master of Economics degree from
Loyola College, Chennai and a Master of Business Administration
degree from Loredo State University, Texas. He has also attended
the Advanced Management Program conducted by Harvard Business
School. Mr. Rama Raju is the younger brother of
Mr. Ramalinga Raju, the Chairman of the company.

V. P. Rama Rao
was appointed to our board of
directors in July 1991 as an independent director. Before
joining our company, he was with the Indian Governments
Administrative Service and was the Chief Secretary to the
government of Andhra Pradesh. He was closely involved with the
industrial development of Andhra Pradesh for over two decades.
He also worked as the Chief of Industrial Infrastructure
Corporation. Mr. Rama Rao holds a Post-Graduate degree in
Arts, a Bachelor degree in Civil Law and a Post-Graduate diploma
in Technical Science and Industrial Administration, from
Manchester University, England. Mr. Rama Rao also sits on
the board of directors of VBC Ferro Alloys Limited, Salguti
Plastics Limited, NCC Finance Limited and Konaseema EPS Oakwell
Power Limited.

Dr. Mangalam Srinivasan
was appointed to our board of
directors in July 1991 as an independent director. She is a
management consultant and a visiting professor at several
U.S. universities. Dr. Mangalam Srinivasan holds a
Ph.D. in technology from George Washington University, a Master
of Business Administration degree (international finance and
organization) from the University of Hawaii, a Master of Arts
degree (English) from Presidency College, Madras University and
was an Advanced Special Scholar (astronomy and physics) at the
University of Maryland. Currently, Dr. Mangalam Srinivasan
is an advisor to the Kennedy School of Government, Harvard
University, Massachusetts where she is a distinguished fellow.

Professor Krishna G. Palepu
was appointed to our board of
directors on January 23, 2003 as an independent director.
Professor Palepu is the Ross Graham Walker Professor of Business
Administration at the Harvard Business School, where he also
holds the title of Senior Associate Dean, Director of Research.
Professor Palepu joined the Harvard Business School faculty in
1983. He graduated with a Masters degree in Physics from Andhra
University and holds a Master of Business Administration degree
from the Indian Institute of Management, and a Ph.D. from the
Massachusetts Institute of Technology. Professor Palepu serves
as consultant to a wide variety of businesses, and is on the
boards of several companies including Dr. Reddys
Laboratories Limited in India, Enamics, Inc. and Harvard
Business School Publishing Co. in the United States.

Vinod K. Dham
was appointed to our board of
directors on January 23, 2003 as an independent director.
Mr. Dham is Vice President and General Manager, Carrier
Access Business Unit, of Broadcom Corporation. Prior to this, he
was the Chairman, President and Chief Executive Officer of
Silicon Spice Inc., which was acquired by Broadcom Corporation.
Mr. Dham obtained his Bachelors degree in Electrical
Engineering (electronics) from the University of Delhi and
received his Master degree in Electrical Engineering (solid
state) from the University of Cincinnati. He held the positions
of Vice President of Intel Corporations Microprocessor
Products Group and General Manager of the Pentium

Anand T.R.
has been our Director and Senior Vice President of the Telecom,
Infrastructure, Media & Entertainment, and
Semiconductors (TIMES) business unit since April 2004.
Prior to this, he was the Chief Operating Officer of the Telecom
Business Unit. During 2001  2002 he was the
chairperson of Satyam, Japan. Prior to joining our company, he
was the Country General Manager  e-Business and Cross
Industry Solutions at IBM Global Services, India. He started his
career at Tata Consultancy Services and later worked at the
Groupe Bull subsidiary in India for eleven years. Mr. Anand
holds a bachelor degree in electronics engineering from the
University Visvesvaraya College of Engineering, Bangalore, and a
post-graduate diploma in Business Management (with
specialization in Information Systems) from the Indian Institute
of Management, Ahmedabad.

Jayaraman G.
was appointed our Vice President, Corporate Affairs and Company
Secretary in October 2000. From March 2000 to September 2000 he
was Assistant Vice President and Company Secretary. Prior to
joining our company, he was with Samrat Spinner Limited as
Director (Finance) and Company Secretary. Mr. Jayaraman
holds a Bachelor of Science degree from University of Madras, is
a fellow member of the Institute of Chartered Accountants of
India and the Institute of Cost and Works Accountants of India.
He is also an associate member of the Institute of Company
Secretaries of India.

Joseph Abraham
was appointed as our Director and
Senior Vice President, Vertical Business Unit  Retail
in November 2000 after being the Senior Vice President,
Strategic Business Unit 7 since 1998. Prior to joining our
company, he was with Tata Consultancy Services Limited as
Executive Vice President, Human Resources. Mr. Abraham
holds a Master of Personnel Management and Industrial Relations
degree from Tata Institute of Social Services and a Differential
Test Battery Certificate from Morrisby Institute, United Kingdom.

Keshab Panda
has been our Director and Senior
Vice President  Head of Satyam Europe Operations
since April 2004. He is also the Chief Executive Officer of
Satyam Technologies Inc, a wholly owned subsidiary of Satyam and
additionally manages multiple strategic relationships with our
key customers as well. Prior to this, as a veteran of the Indian
Space Research Organization (ISRO) Satellite Centre, he
played an important role with the design of Indias
indigenous communications satellite, INSAT II Satellite and
the Defence Research Development Organization (DRDO) in
various capacities.

Manish Sukhlal Mehta
has been our Director and Senior
Vice President  Horizontal Competency
Unit  SAP, Engineering & Spatial Services,
since April 2004. Prior to his current role, he was responsible
for building our automotive practice. Mr. Mehta also played
a key role in establishing the Manufacturing Business Unit in
Satyam. He also established a Strategic Business Unit for
Banking & Finance and managed it successfully as a
profit center. Prior to joining our company, Mr. Mehta was
heading the business operations of Datamatics in Chennai. He
began his career with Tata Consultancy Services Limited, where
he served for 15 years in various positions. Mr. Mehta
holds a Masters in Science (Hons.)  Chemistry, and a
Masters in Engineering  Industrial Development from
the Birla Institute of Technology & Science (BITS),
Pilani.

Mohan Eddy F. S.
has been our Director, Internal
Information Systems and Platinum Processes Group since 2003. He
was the Director, Horizontal Business Unit 
Collaborative Enterprise Solutions since November 2000 and a
Director, Strategic Business Unit of Satyam Renaissance
Consulting from 1995. Mr. Mohan Eddy holds a Bachelor of
Engineering degree and a Post-Graduate diploma in Management
from the Indian Institute of Management, Calcutta.

Murty A. S.
has been our Director and Senior Vice President, Global Human
Resources since November 2000. He was Senior Vice President,
Human Resources in 1999 and Senior Vice President of Strategic
Business Unit I since 1994. Before joining our company,
Mr. Murty was with Tata Consulting Services Limited for
over 12 years. Mr. Murty holds a Master of Engineering
degree from the Indian Institute of Science, Bangalore.

Prabhat G. B.
has been our Director, Horizontal Business Unit 
Business Solution since November 2000. He is responsible for
leading our business into the higher-end consulting service
offerings. He was co-founder and Director, Strategic Business
Unit of Satyam Renaissance Consulting from 1995, prior to which
he worked for nearly 10 years for the TVS Group.
Mr. Prabhat holds a Master of Science (Computer Sciences)
degree from the Indian Institute of Technology, Chennai.

Ram Mynampati
has been our President, Commercial
and Healthcare Businesses since October 2002. He was our
Executive Vice President and Chief Operating Officer, Vertical
Business Unit  Insurance, Banking and Financial
Services, Healthcare since November 2000 and Executive Vice
President, Strategic Business Units 1, 2 and 4 in 1999. He
also provides executive leadership to our customer relationship
with General Electric and oversees our industry groups which
service the U.S. Government. Prior to joining Satyam,
Mr. Mynampati has held key positions in large,
multinational organizations, such as UNISYS and Southern
California Gas Company. Mr. Mynampati holds a Master of
Computer Science degree from California State University.

Ravi Shanker Bommakanti
has been our Director and Senior
Vice President of Insurance Business Unit since April, 2004.
Prior to this, he was responsible for the GE Strategic
Relationship unit of Satyam for five years. Mr. Bommakanti
was also responsible for managing the Dun and Bradstreet
relationship for Satyam and in developing client-server
competencies in Satyam. Prior to joining our company,
Mr. Bommakanti worked with Citicorp in United States and
India and Bankers Trust in Australia. Mr. Bommakanti is a
Chartered Accountant with experience in Financial Services and
Accounting.

Shailesh Shah
has been our Director and Senior
Vice President  Corporate Strategy since September,
2004. Mr. Shahs last employment was with Watson Wyatt
(India), as its Managing Director. Spanning his 20 year
career, Mr. Shah has worked with organizations like Price
Waterhouse, The Strategy Consulting Group and the Hay Group.
Mr. Shah holds a Bachelors degree in Mechanical Engineering
from Bangalore University, a Masters in Science Industrial
Engineering & Operations Research from Syracuse
University and a Master of Business Administration degree from
Drexel University, United States.

Srinivas V.
has been our Director, Senior Vice President and Chief Financial
Officer since October 2002. He was our Senior Vice President and
Chief Financial Officer since November 2000 and as Vice
President and Chief Financial Officer from 1998.
Mr. Srinivas is a fellow member of the Institute of
Chartered Accountants of India and the Institute of Company
Secretaries of India. He is also an associate member of the
Institute of Cost and Works Accountants of India. In addition,
he holds a Bachelor of Law degree and a Master of Commerce
degree from Osmania University, Hyderabad. He is also a director
of Nipuna and Sify Limited.

Subramanian
D. has been our Director since
October 2002. He is also Director and Senior Vice
President  Manufacturing, Automotive, Energy, Oil and
Gas and Utilities since April 2004. He was Senior Vice
President  SAP  Manufacturing and
Engineering practices since October 2002 and Vice
President  SAP since joining our company in 1999.
Mr. Subramanian graduated with a Master of Business
Administration degree from Annamalai University, Tamil Nadu and
is an associate member of the Institute of Cost and Works
Accountants of India.

Vijay Prasad Boddupalli
has been our Director and Senior
Vice President  EABIS (Enterprise Applications and
Business Intelligence Solutions) business unit since April 2004.
Prior to joining our company in 1996 Mr. Boddupalli worked
in the United States and Australia. He started his career with
Tata Consulting Services Limited, during which time he worked
with American Express in the United Kingdom, Slavenburgs
bank in the Netherlands, New Zealand Post Office in New Zealand.
Mr. Boddupalli has a Bachelor degree of Technology in
Electronics & Communications Engineering, from Regional
Engineering College, Warangal and a Masters degree of Technology
in Computer Science from Indian Institute of Technology, Bombay.

Virender Aggarwal
is our Director and Senior Vice
President  APAC-MEIA territories (Asia Pacific,
Middle East, India and Africa) since April, 2004. He is
responsible for management of business

and delivery operations, which include the
development centers across China, Australia, Malaysia,
Singapore, Middle East and Japan. Prior to joining Satyam,
Mr. Aggarwal was the head of a large Indian Software and
Training Company operating out of Singapore. Mr. Aggarwal
has completed his Masters in Management from BITS, Pilani and
has more than 18 years experience, including eight
years in general management positions. Mr. Aggarwals
other assignments included working for management consultancy
firm  AF Ferguson and Co in India, and various
positions of responsibility in other organizations in the field
of IT consulting.

Our ASOP and ESOP Plans

We have three associate stock option plans: our
Associate Stock Option Plan, or ASOP, established in May 1998;
our Associated Stock Option Plan B, or ASOP B, established in
May 1999; and our Associated Stock Option Plan ADS, or ASOP ADS,
established in May 1999. We also have the Employee Stock Option
Plan, or ESOP, established by Nipuna in April 2004.

ASOP

The aspects of the ASOP differ significantly from
typical U.S. stock option plans. We established a
controlled associate welfare trust called the Satyam Associate
Trust to administer the ASOP and issued warrants to
purchase 13.0 million equity shares of Satyam. To give
our associates the benefit of our stock split in September 1999,
the Trust exercised its warrants to acquire our shares before
the split using the proceeds from bank loans. The Trust
periodically grants eligible associates warrants to purchase
equity shares held by or reserved for issuance by the Trust. The
warrants may vest immediately or may vest over a period ranging
from two to three years, depending on the associates
length of service and performance. Upon vesting, employees have
30 days in which to exercise their warrants. Each warrant
issued by the Trust currently entitles the associate holding the
warrant to purchase 10 equity shares of our company at a
price of Rs.450 ($10.4), plus an interest component associated
with the loan the Trust assumed, for the conversion of the
warrants it held. The interest component is computed based on a
fixed vesting period and a fixed interest rate. This exercise
price has been substantially below the market price of our
shares at the time the warrants have been granted by the Trust.
Neither we nor the Trust may increase the exercise price of the
warrants. As of March 31, 2005, warrants (net of forfeited
and cancelled) to purchase 11,805,860 equity shares have
been granted to associates pursuant to ASOP, and warrants to
purchase 11,565,360 equity shares have been exercised.

ASOP
B

The ASOP B is substantially similar to the ASOP
and is administered by a committee of our board of directors.
The SEBI guidelines define the exercise price as the price
payable by the employee for exercising the option granted to him
in pursuance of the stock option plan. In determining the
exercise price, we opted for the higher of the following:
(a) the closing price of the shares on the date of the
meeting of the Compensation Committee convened to grant the
stock options, on the stock exchange where highest volumes are
traded; or (b) the average of the two weeks high and low
price of the share preceding the date of grant of option on the
stock exchange on which the shares of the company are listed. As
of March 31, 2005, options (net of forfeited and cancelled)
to purchase 30,889,452 equity shares have been granted to
associates under this plan and warrants to
purchase 4,059,137 equity shares have been exercised.

ASOP
ADS

Under ASOP ADS, we periodically issue grants to
eligible associates to purchase ADSs. The warrants issued under
ASOP ADS can be granted at a price per option which is not less
than 90% of the value of one ADS as reported on NYSE (fair
market value) on the date of grant converted into Indian Rupees
at the rate of exchange prevalent on the day of grant. As of
March 31, 2005, warrants (net of forfeited and cancelled)
for 1,590,978 ADSs representing 3,181,956 equity shares have
been granted to associates under

the ASOP ADS, and warrants to purchase
333,077 ADSs representing 666,154 equity shares have been
exercised.

Nipuna
ESOP

Under the Nipuna ESOP options are granted at fair
value to associates as determined by an independent valuer as of
the date of grant. The options granted under the Nipuna ESOP
vest in three equal trances at the end of the second, third and
fourth year from the date of grant. As of March 31, 2005,
options (net of forfeited and cancelled) for 813,578 equity
shares have been granted to associates under the Nipuna ESOP,
and no options to purchase equity shares have been exercised.

The following table sets forth as of May 3,
2005, certain information with respect to beneficial ownership
of our equity shares by:



each of our directors;



all of our executive officers and directors as a
group;



each shareholder known to us to be the beneficial
owner of 5% or more of our equity shares;



each selling shareholder who beneficially owns 1%
or greater of our equity shares; and



all other selling shareholders as a group who
each beneficially own less than 1% of our equity shares as a
group.

Beneficial ownership is determined in accordance
with rules of the SEC, which generally attribute beneficial
ownership of securities to persons who possess sole or shared
voting power or investment power with respect to those
securities and includes equity shares issuable pursuant to the
exercise of stock options or warrants that are immediately
exercisable or exercisable within 60 days of March 31,
2005. These shares are deemed to be outstanding and to be
beneficially owned by the person holding those options or
warrants for the purpose of computing the percentage ownership
of that person, but are not treated as outstanding for the
purpose of computing the percentage ownership of any other
person. Unless otherwise indicated, all information with respect
to the beneficial ownership of any principal or selling
shareholder has been furnished by such shareholder and, unless
otherwise indicated, we believe that persons named in the table
have sole voting and sole investment power with respect to all
the equity shares shown as beneficially owned, subject to
community property laws where applicable. Except as otherwise
noted below, the address for each person listed on the table is
c/o Satyam Technology Center, Bahadurpallay Village,
Qutbullapur Mandal, R.R. District  500855, Hyderabad,
Andhra Pradesh, India. The shares beneficially owned by the
directors include equity shares owned by their family members to
which such directors disclaim beneficial ownership.

The share numbers and percentages listed below
are based on 319,658,813 equity shares outstanding, and include
shares issuable upon exercise of outstanding options or warrants
within 60 days of May 3, 2005. Amounts representing
less than 1% are indicated with an *.

These shares are held among various affiliates of
Templeton Global Advisors Limited. This information is derived
from the Companys shareholder records as of May 3,
2005.

(6)

This shareholder is an affiliate of a registered
broker-dealer and shares owned by this shareholder were
purchased in the ordinary course of business. At the time of the
purchase of the shares offered, the shareholder had no
agreements or understandings, directly or indirectly, with any
person to distribute the shares.

These shares are held among various affiliates of
Fidelity Management and Research Company. This information is
derived from the Companys shareholder records as of
May 3, 2005. Based on Amendment 1 to Schedule 13G (File
No. 005-62431) filed with the SEC on February 14,
2005, Fidelity Management and Research Company is a wholly-owned
subsidiary of FMR Corp.

(8)

HDFC Trustee Company Limited is a trustee company
of an Indian mutual fund. The documentation relating to the
equity shares to be sold in this offering were executed by
Sanjitdas Gupta, Mohandas Madhavan and Savio Ferreira acting
under power of attorney, each of whom does not have any
beneficial ownership in the subject shares.

(9)

This shareholder is an affiliate of a registered
broker-dealer and is an affiliate of a managing underwriter in
this offering. The shares owned by this shareholder were
purchased in the ordinary course of business. At the time of the
purchase of the shares offered, the shareholder had no
agreements or understandings, directly or indirectly, with any
person to distribute the securities.

(10)

Life Insurance Corporation of India is a
financial institution owned by the Government of India. The
documentation relating to the equity shares to be sold in this
offering were executed by Nibedan Misra acting under power of
attorney, who does not have any beneficial ownership in the
subject shares.

(11)

Unit Trust of India is a financial institution
owned by the Government of India. The documentation relating to
the equity shares to be sold in this offering were executed by
D L Gokhle, Ashok A Tawde, Mohandas Madhavan, Savio
Ferreira and Sanjitdas Gupta acting under power of attorney,
each of whom does not have any beneficial ownership in the
subject shares.

(12)

Includes shareholders who are affiliates of
registered broker-dealers. The shares owned by these
shareholders were purchased in the ordinary course of business.
At the time of the purchase of the shares offered, these
shareholders had no agreements or understandings, directly or
indirectly, with any person to distribute the shares.

*

Less than 0.1% of total.

Mr. Ramalinga Raju, our chairman, and
Mr. Rama Raju, our managing director and chief executive
officer, have advised us that they intend to donate (or sell and
donate the proceeds of such sale) to a philanthropic
organization operating in India. Mr. Ramalinga Raju and
Mr. Rama Raju have also advised us that they currently
expect to make such donation in the near future, and that they
would each donate an amount of shares representing up to
approximately 0.25% of our shares currently outstanding (or in
total up to approximately 0.5% of our shares currently
outstanding). Such donation would not be made in connection with
this offering, and would be undertaken pursuant to an exemption
from the registration requirements of the Securities Act. This
proposed donation is not subject to the lock-up provisions
described under Principal and Selling Shareholders.

We have prepared and sent to all holders of our
equity shares an invitation to participate in this offering by
submitting their equity shares for sale in this offering
pursuant to Indian regulations. Our invitation to participate
has been mailed to holders of equity shares. Holders of ADSs are
not eligible to participate in the transactions contemplated by
the invitation to participate. Under Indian law, an issuer in
India, such as our company, can sponsor the issue of ADSs
through an overseas depositary against underlying equity shares
accepted from holders of its equity shares. Sponsorship does not
mean we are purchasing or causing the purchase of the equity
shares directly or indirectly or recommending that holders
participate in this offering. We are not purchasing any equity
shares in this transaction. Equity shares will be purchased
solely by the underwriters from the selling shareholders for
sale in this offering. The ADS offering must be approved by the
Foreign Investment Promotion Board, or FIPB. The FIPB by its
letter dated January 5, 2005 has stated that the offering
falls under the automatic route. However, we are required to
make certain filings with the RBI as per the above mentioned
letter of the FIPB.

Under the terms of the invitation to participate,
the related letter of transmittal, escrow agreement and other
documents, the shares to be sold by the selling shareholders
will be held in escrow by Citibank N.A., Mumbai, as escrow
agent, until such time as they are required to be deposited with
Citibank N.A., Mumbai, as custodian on behalf of Citibank N.A.,
New York, the Depositary, against the issuance of ADSs
representing such shares and to be delivered to the underwriters
under the terms of the underwriting agreement entered into by
us, the underwriters and the selling shareholders. The
successful completion of these transactions by us, the selling
shareholders and the escrow agent is a condition precedent to
the underwriters obligation to purchase any ADSs in this
offering.

Set forth below is the material information
concerning our share capital and a brief summary of the material
provisions of our Articles of Association, Memorandum of
Association and the Companies Act, all as currently in effect.
The following description of our equity shares and the material
provisions of our Articles of Association and Memorandum of
Association does not purport to be complete and is qualified in
its entirety by our Articles of Association and Memorandum of
Association that are included as exhibits or incorporated by
reference to the registration statement of which this prospectus
forms a part and by the provisions of applicable law.

The Company

We are registered under number 01-7564 with the
Registrar of Companies, Andhra Pradesh State, India. Our
Memorandum and Articles of Association permit us to engage in a
wide variety of activities, including all of the activities in
which we currently engage or intend to engage, as well as other
activities in which we currently have no intention of engaging.

Share Capital Structure

Our authorized share capital is 375,000,000
equity shares, par value Rs.2 per share. As of
March 31, 2005, equity shares of 317,840,951 are issued and
outstanding which excludes 1,424,340 equity shares issued to the
Satyam Associate Trust and outstanding pursuant to our ASOP.

The equity shares are our only class of share
capital. However, our Articles of Association and the Companies
Act permit us to issue preference shares in addition to the
equity shares. For the purposes of this document,
shareholder means a shareholder who is registered as
a member in the register of members of our company.

As of March 31, 2005, options to purchase
11,805,860 shares under our ASOP, options to purchase
30,889,452 shares under our ASOP-B and options to purchase
1,590,978 ADSs representing 3,181,956 shares under our
ASOP ADS, have been granted, net of cancellations. As of
March 31, 2005, options to
purchase 5,695,198 equity shares and 356,850 ADSs
were outstanding. We currently have no convertible debentures or
warrants (other than pursuant to the ASOP) outstanding.

Dividends

Our board of directors has recommended a final
dividend of Rs.3 per share for the fiscal 2005. This
dividend will be paid out after the approval of our
shareholders. We paid out dividends of Rs.1,722.7 million
($37.6 million), Rs.1,207.0 million
($26.2 million), Rs.469.0 million ($9.7 million)
and Rs.279.0 million ($6.4 million) in fiscal 2005,
2004, 2003 and 2002, respectively.

Under the Companies Act, unless our board of
directors recommends the payment of a dividend, we may not
declare a dividend. Similarly, under our Articles of
Association, although the shareholders may, at the annual
general meeting, approve a dividend in an amount less than that
recommended by the board, they cannot increase the amount of the
dividend. In India, dividends generally are declared as a
percentage of the par value of a companys equity shares.
The dividend recommended by the board, if any, and subject to
the limitations described above, is distributed and paid to
shareholders in proportion to the paid-up value of their shares
within 30 days of the approval by the shareholders at the
annual general meeting. Pursuant to our Articles of Association
and the Companies Act, our board has discretion to declare and
pay interim dividends without shareholders approval the
amount of which must be deposited in a separate bank account
within five days and paid to shareholders within 30 days of
the declaration of dividends. Under the Companies Act, dividends
can only be paid in cash to the registered shareholder at a
record date fixed during or before the annual general meeting or
to his order or his bankers order.

The Companies Act provides that any dividends
that remain unpaid or unclaimed after the 30 day period
must be transferred to a special bank account opened by the
company at an approved bank. We transfer any dividends that
remain unclaimed for seven years from the date of the transfer
to an Investor

Education and Protection fund established by the
Government of India. After the transfer to this fund, such
unclaimed dividends may not be claimed.

Under the Companies Act, dividends and interim
dividends may be paid out of profits of a company in the year in
which the dividend and/or interim dividend is declared or out of
the undistributed profits of previous fiscal years. Before
declaring a dividend and/or interim dividend greater than 10.0%
of the par value of its equity shares, a company is required
under the Companies Act to transfer to its reserves a minimum
percentage of its profits for that year, ranging from 2.5% to
10.0% depending upon the dividend percentage to be declared in
such year. The Companies Act further provides that, in the event
of an inadequacy or absence of profits in any year, a dividend
and/or interim dividend may be declared for such year out of the
accumulated profits, subject to the following conditions:



the rate of dividend to be declared may not
exceed 10.0% of its paid-up capital or the average of the rate
at which dividends were declared by the company in the prior
five years, whichever is less;



the total amount to be drawn from the accumulated
profits earned in the previous years and transferred to the
reserves may not exceed an amount equivalent to 10.0% of its
paid-up capital and free reserves, and the amount so drawn is to
be used first to set off the losses incurred in the fiscal year
before any dividends in respect of preference or equity shares
are declared; and



the balance of reserves after withdrawals shall
not fall below 15.0% of its paid-up capital.

For additional information, please see
Dividends. A tax of 12.8%, including the presently
applicable surcharge, of the total dividend declared,
distributed or paid for a relevant period is payable by our
company. Additionally, the Finance Act, 2004 levies an education
cess at the rate of 2.0% of such tax and surcharge after which
the effective dividend distribution tax payable would be 13.06%.

Bonus Shares

In addition to permitting dividends to be paid
out of current or retained earnings as described above, the
Companies Act permits us to distribute an amount transferred
from the general reserve or surplus in our profit and loss
account to our shareholders in the form of fully paid-up bonus
equity shares, which are similar to a stock dividend. The
Companies Act also permits the issuance of bonus shares from a
securities premium account. Bonus shares are distributed to
shareholders in the proportion recommended by the board and is
distributed to shareholders in proportion to the number of
equity shares owned by the shareholder. Shareholders of record
on a fixed record date are entitled to receive such bonus shares.

Consolidation and sub-division of
shares

The Companies Act permits a company to split or
combine the par value of its shares, provided such split or
combination is not made in fractions. Shareholders of record on
a fixed record date are entitled to receive the split or
combination.

Preemptive Rights and Issue of Additional
Shares

The Companies Act gives shareholders the right to
subscribe for new shares in proportion to their respective
existing shareholdings unless otherwise determined by a special
resolution passed by a General Meeting of the shareholders.
Under the Companies Act and our Articles of Association, in the
event of an issuance of securities, subject to the limitations
set forth above, a company must first offer the new shares to
the shareholders on a fixed record date. The offer must include:
(i) the right, exercisable by the shareholders of record,
to renounce the shares offered in favor of any other person; and
(ii) the number of shares offered and the period of the
offer, which may not be less than 15 days from the date of
offer. If the offer is not accepted, it is deemed to have been
declined and thereafter the board of directors is authorized
under the Companies Act to distribute any new shares not
purchased by the preemptive rights holders in the manner that it
deems most beneficial to the company. Holders of ADSs may not be
able to participate in any such offer. See Description of
American Depositary Shares  Other Distributions.

We must convene an Annual General Meeting of
shareholders each year within 15 months of the previous
annual general meeting or within six months of the end of the
previous fiscal year, whichever is earlier to adopt the accounts
for such fiscal year and to transact other businesses. In
certain circumstances a three month extension may be granted by
the Registrar of Companies to hold the Annual General Meeting.
In addition, we may convene an extraordinary general meeting of
shareholders when necessary or at the request of a shareholder
or shareholders holding at least 10.0% of our paid-up capital
carrying voting rights. The annual general meeting of the
shareholders is generally convened by our Secretary pursuant to
a resolution of the board. Written notice setting out the agenda
of the meeting must be given at least 21 days (excluding
the day of mailing and day of meeting) before the date of the
general meeting to the shareholders on record. Shareholders who
are registered as shareholders on the date of the general
meeting are entitled to attend or vote at such meeting.

The annual general meeting of shareholders must
be held at our registered office or at such other place within
the city in which the registered office is located; meetings
other than the annual general meeting may be held at any other
place if so determined by the board. Our registered office is
located at Mayfair Centre, S P Road, Secunderabad 500 003,
Andhra Pradesh, India.

Our Articles of Association provide that a quorum
for a general meeting would require the attendance of at least
five shareholders in person.

Voting Rights

At any general meeting, voting is by show of
hands unless a poll is demanded by a shareholder or shareholders
present in person or by proxy holding at least 10.0% of the
total shares entitled to vote on the resolution or by those
holding shares with an aggregate paid-up value of at least
Rs.50,000. Upon a show of hands, every shareholder entitled to
vote and present in person has one vote and, on a poll, every
shareholder entitled to vote and present in person or by proxy
has voting rights in proportion to the paid-up capital held by
such shareholder. The chairman of our board has a deciding vote
in the case of any tie. For a description of voting of ADSs,
please see Description of American Depositary
Shares  Voting Rights.

Any shareholder may appoint a proxy. The
instrument appointing a proxy must be delivered to us at least
48 hours before the meeting. Unless provided to the
contrary in the Articles of Association, a proxy may not vote
except on a poll. A corporate shareholder may appoint an
authorized representative who can vote on behalf of the
shareholder, both upon a show of hands and on a poll.

Ordinary resolutions may be passed by simple
majority of those present and voting at any general meeting for
which the required period of notice has been given. However,
special resolutions such as amendments to our Articles of
Association and the object clause of the Memorandum of
Association, commencement of a new line of business, the waiver
of preemptive rights for the issuance of any new shares and a
reduction of share capital, require that votes cast in favor of
the resolution (whether by show of hands or poll) are not less
than three times the number of votes, if any, cast against the
resolution. Further, the Companies Act requires certain
resolutions such as those listed below to be voted on only by a
postal ballot:



amendments of the memorandum of association to
alter the objects of the company and to change the registered
office of the company under Section 146 of the Companies
Act;



the issuance of shares with differential rights
with respect to voting, dividend or other provisions of the
Companies Act;



the sale of the whole or substantially the whole
of an undertaking or facilities of the company;



providing loans, extending guarantees or
providing a security in excess of the limits allowed under
Section 372A of the Companies Act;

varying the rights of the holders of any class of
shares or debentures;



the election of a director by minority
shareholders; and



the buy-back of shares.

Register of Shareholders; Record Dates and
Transfer of Shares

We maintain a register of shareholders. The
register of shareholders in electronic form, is maintained
through The National Securities Depository Limited and the
Central Depository Services (India) Ltd. For the purpose of
determining the shares entitled to annual dividends, the
register is closed for a specified period before the annual
general meeting. The date on which this period begins is the
record date.

To determine which shareholders are entitled to
specified shareholder rights, we may close the register of
shareholders. The Companies Act requires us to give at least
seven days prior notice to the public before such closure.
We may not close the register of shareholders for more than 30
consecutive days, and in no event for more than 45 days in
a year. Trading and delivery of equity shares may, however,
continue after the register of shareholders is closed.

Transfer of Shares

Shares held through depositaries are transferred
in the form of book entries or in electronic form in accordance
with the regulations laid down by SEBI. These regulations
provide the regime for the functioning of the depositaries and
the participants and set out the manner in which the records are
to be kept and maintained and the safeguards to be followed in
this system. Transfers of beneficial ownership of shares held
through a depositary are exempt from stamp duty.

SEBI requires that our equity shares for trading
and settlement purposes be in book-entry form for all investors,
except for transactions that are not made on a stock exchange
and transactions that are not required to be reported to the
stock exchange. Transfers of equity shares in book-entry form
require both the seller and the purchaser of the equity shares
to establish accounts with depositary participants appointed by
depositories established under the Depositories Act, 1996.
Charges for opening an account with a depositary participant,
transaction charges for each trade and custodian charges for
securities held in each account vary depending upon the practice
of each depositary participant. Upon delivery, the equity shares
shall be registered in the name of the relevant depositary on
our books and this depositary shall enter the name of the
investor in its records as the beneficial owner. The transfer of
beneficial ownership shall be effected through the records of
the depositary. The beneficial owner shall be entitled to all
rights and benefits and subject to all liabilities in respect of
his securities held by a depositary.

The requirement to hold the equity shares in
book-entry form will apply to the ADS holders when the equity
shares are withdrawn from the depositary facility upon surrender
of the ADSs. In order to trade the equity shares in the Indian
market, the withdrawing ADS holder will be required to comply
with the procedures described above.

Following the introduction of the Depositories
Act, 1996, and the repeal of Section 22A of the Securities
Contracts (Regulation) Act, 1956, which enabled companies to
refuse to register transfers of shares in some circumstances,
the equity shares of a public company are freely transferable,
subject only to the provisions of Section 111A of the
Companies Act. Our equity shares are freely transferable,
subject only to the provisions of the Companies Act under which,
if a transfer of equity shares contravenes the Securities and
Exchange Board of India Act, 1992 or the regulations issued
under it or the Sick Industrial Companies (Special Provisions)
Act, 1985, or any other similar law, the Indian Company Law
Board/ Indian Company Law Tribunal may, on application made by
us, a depositary incorporated in India, an investor, SEBI or
certain other parties, direct a rectification of the records. It
is a condition of our listing that we transfer equity shares and
deliver share certificates duly endorsed for the transfer within
one month of the date of lodgment of transfer. Since we are a
public company, the provisions of Section 111A will apply
to us. Our Articles of Association currently contain provisions
which give our board of directors discretion to refuse to
register a transfer of shares in some circumstances.
Furthermore, in accordance with

the provisions of Section 111A(2) of the
Companies Act, our board of directors may refuse to register a
transfer of shares if they have sufficient cause to do so.

If a company without sufficient cause refuses to
register a transfer of equity shares within two months from the
date on which the instrument of transfer is delivered to the
company, the transferee may appeal to the Company Law Board
seeking to register the transfer of equity shares. The Indian
Company Law Board/ Indian Company Law Tribunal may, in its
discretion, issue an interim order suspending the voting rights
attached to the relevant equity shares before completing its
investigation of the alleged contravention. Our Articles of
Association provide for certain restrictions on the transfer of
equity shares, including granting power to the board of
directors in certain circumstances, to refuse to register or
acknowledge transfer of equity shares or other securities issued
by us.

Under the Companies Act, unless the shares of a
company are held in a dematerialized form, a transfer of shares
is effected by a duly stamped instrument of transfer in the form
prescribed by the Companies Act and the rules there under
together with delivery of the share certificates.

We undertake the functions of a transfer agent
ourselves. Certain foreign exchange control and security
regulations apply to the transfer of equity shares by a
non-resident or a foreigner. See Restrictions on Foreign
Ownership of Indian Securities.

We have entered into listing agreements with The
Stock Exchange, Mumbai and the National Stock Exchange on which
our outstanding equity shares are listed. It is a condition of
our listing that if an acquisition of our equity shares results
in the acquirer holding any securities beyond 5.0% of our voting
capital, we and the acquirer shall be subject to the provisions
of the Securities and Exchange Board of India (Substantial
Acquisitions of Shares & Takeovers) Regulations, 1997.
See  Takeover Code and Insider Trading
Regulations.

Disclosure of
Ownership Interest

Section 187C of the Companies Act requires
beneficial owners of shares of Indian companies who are not
holders of record to declare to us details of the holder of
record and the nature and details of the beneficial owners
interest in the shares. Any person who fails to make the
required declaration within 30 days may be liable for a
fine of up to Rs.1,000 for each day the declaration is not made.
Any charge, promissory note or other collateral agreement
created, executed or entered into with respect to any equity
share by its registered owner, or any hypothecation by the
registered owner of any equity share, shall not be enforceable
by the beneficial owner or any person claiming through the
beneficial owner if such declaration is not made. Failure to
comply with Section 187C will not affect our obligation to
register a transfer of shares or to pay any dividends to the
registered holder of any shares pursuant to which the
declaration has not been made. While it is unclear under Indian
law whether Section 187C applies to holders of ADSs,
investors who exchange ADSs for the underlying equity shares
will be subject to the restrictions of Section 187C.
Additionally, holders of ADSs may be required to comply with the
notification and disclosure obligations pursuant to the
provisions of the deposit agreement entered into by us, such
holders and a depositary. For additional information regarding
the deposit agreement, please see Description of American
Depositary Shares.

Audit and Annual Report

At least 21 days before the date of the
annual general meeting of shareholders (excluding the day of
mailing), we must distribute to our shareholders a detailed
version of our audited balance sheet and profit and loss account
and the related reports of the board and the auditors, together
with a notice convening the annual general meeting. Under the
Companies Act, we must file the balance sheet and annual profit
and loss account presented to the shareholders within
30 days of the conclusion of the annual general meeting
with the Registrar of Companies in Andhra Pradesh, India, which
is the state in which our registered office is located. We must
also file an annual return containing a list of our shareholders
and other information, within 60 days of the conclusion of
the meeting.

Company Acquisition of Equity Shares and
Reduction of Equity Share Capital

Under the Companies Act, approval of at least
75.0% of a companys shareholders voting on the matter and
approval of the High Court of the State in which the registered
office of the company is situated is required to reduce a
companys share capital. A company may, under some
circumstances, acquire its own equity shares without seeking the
approval of the High Court. However, a company would have to
extinguish the shares it has so acquired within the prescribed
time period. Generally, a company is not permitted to acquire
its own shares for treasury operations. An acquisition by a
company of its own shares (without having to obtain the approval
of the High Court) must comply with prescribed rules,
regulations and conditions as laid down in the Indian Companies
Act and additionally listed public limited companies are
required to comply with the Securities and Exchange Board of
India (Buy-back of Securities) Regulations, 1998, or Buy-back
Regulations.

ADS holders will be eligible to participate in a
buy-back in certain cases. An ADS holder may acquire equity
shares by withdrawing them from the depositary facility in
accordance with the Depositary Agreements and then selling those
equity shares back to the Company. ADS holders should note that
equity shares withdrawn from the depositary facility may only be
re-deposited into the depositary facility under certain limited
circumstances. See Description of American Depositary
Shares  Withdrawal of Equity Shares Upon Cancellation
of ADSs.

There can be no assurance that the equity shares
offered by an ADS investor in any buy-back of shares by us will
be accepted by us. The position regarding regulatory approvals
required for ADS holders to participate in a buy-back is not
clear. ADS investors are advised to consult their Indian legal
advisers prior to participating in any buy-back by us, including
in relation to any regulatory approvals and tax issues relating
to the buy-back.

Redemption of Equity Shares

Under the Companies Act, equity shares are not
redeemable.

Discriminatory provisions in
Articles

There are no provisions in our Articles of
Association discriminating against any existing or prospective
holder of such securities as a result of such shareholder owning
a substantial number of shares.

Alteration of Shareholder Rights

Under the Companies Act and subject to the
provisions of Articles of Association of a company, the rights
of any class of shareholders can be altered or varied
(i) with the consent in writing of the holders of not any
less than three-fourths of the issued shares of that class; or
(ii) by special resolution passed at a separate meeting of
the holders of the issued shares of that class. In the absence
of any such provisions in the Articles of Association, such
alteration or variation is permitted as long as it is not
prohibited by the agreement governing the issuance of the shares
of that class. Under the Companies Act, our Articles of
Association may be altered by a special resolution of the
shareholders.

Limitations on the Right to own
Securities

The limitations on the rights to own securities
of Indian companies, including the rights of non-resident or
foreign shareholders to hold securities, are discussed in the
sections entitled Restrictions on Foreign Ownership of
Indian Securities and Risk Factors.

Liquidation Rights

Subject to the rights of creditors, employees and
the holders of any shares entitled by their terms to
preferential repayment over the equity shares, if any, in the
event of our winding-up the holders of the equity shares are
entitled to be repaid the amounts of paid-up capital or credited
as paid up on those equity shares. All surplus assets after
payments due to the holders of any preference shares at the

commencement of the winding-up shall be paid to
holders of equity shares in proportion to the amount paid up or
credited as paid up on these equity shares, at the commencement
of the winding up.

Takeover Code and Insider Trading
Regulations

Disclosure and mandatory bid obligations under
Indian law are governed by the Securities and Exchange Board of
India (Substantial Acquisition of Shares and Takeovers)
Regulations, 1997, the Takeover Code, and the Securities and
Exchange Board of India (Prohibition of Insider Trading)
Regulations, 1992, the Insider Trading Regulations, which
prescribes the thresholds or trigger points that give rise to
these obligations.

The most important features of the Takeover Code,
as amended, are as follows:

Any acquirer (meaning a person who, directly or
indirectly, acquires or agrees to acquire shares or voting
rights in a company, either by himself or with any person acting
in concert) who acquires shares or voting rights that would
entitle him to more than 5.0% of the shares or voting rights in
a company is required to disclose the aggregate of his
shareholding or voting rights in that company to the company
(which in turn is required to disclose the same to each of the
stock exchanges on which the companys shares are listed)
within two days of (a) the receipt of allotment
information, or (b) the acquisitions of shares or voting
rights, as the case may be. Such notification is also required
upon acquisition of 10%, 14%, 54% and 74% of the outstanding
shares or voting rights of a publicly listed company.



A person who holds more than 15.0% of the shares
or voting rights in any company is required to make annual
disclosure of his holdings to that company (which in turn is
required to disclose the same to each of the stock exchanges on
which the companys shares are listed).



Promoters or persons in control of a company are
also required to make annual disclosure of their holdings in the
same manner.



An acquirer cannot acquire shares or voting
rights which (taken together with existing shares or voting
rights, if any, held by him or by persons acting in concert with
him) would entitle such acquirer to exercise 15.0% or more of
the voting rights in a company, unless such acquirer makes a
public announcement offering to acquire a minimum 20.0% of the
shares of the company.



An acquirer who, together with persons acting in
concert with him, holds between 15.0% and 55.0% of the shares
cannot acquire additional shares or voting rights that would
entitle him to exercise a further 5.0% of the voting rights in
any financial year unless such acquirer makes a public
announcement offering to acquire a minimum 20.0% of the shares
of the company, or such number of shares that would not result
in the public shareholding in such company being reduced to a
level below the limit specified in the listing agreement with
the stock exchange for the purpose of listing on a continuous
basis.



No acquirer is allowed to acquire shares or
voting rights through market purchases and preferential
allotment, which will entitle such acquirer to exercise more
than 55.0% of the voting rights in a company other than in
accordance with the Takeover Code.



Notwithstanding the above, any acquirer who seeks
to acquire shares or voting rights whereby the public
shareholding in the company may be reduced to a level below the
limit specified in the listing agreement with the stock exchange
for the purpose of listing on a continuous basis, may acquire
such shares or voting rights only in accordance with the
guidelines or regulations regarding delisting of securities
specified by SEBI.